Abstract: Based on the theory of internal capital allocation in companies,from the perspective of fixed asset investment and long equity investment,this paper analyzes the effect of the private benefits of controlling shareholder on the internal capital allocation strategy.The conclusions show that,the private benefit of controlling shareholder is one of the most important reasons leading to distortion and inefficiency of capital allocation,and the level of distortion is nonlinear changing with the separation-degree between ownership and control.However,tendencies of change have two situations,which are determined by the rate of return on fixed assetinvestment and long equity investment.

Key words: large shareholders expropriation, private benefit, capital allocation, fixed asset investment