In an internal capital market, individual departments may compete for a share of the firm's budget by engaging in wasteful influence activities. We show that firms with more levels of hierarchy may experience lower influence costs than less hierarchical firms, even though the former provide more...

We analyze a unique dataset from a survey of CFOs of diversified firms to examine four areas of diversification and internal capital markets: causes and financing effects of corporate diversification, capital budgeting processes, capital investment methods, and reallocation policies in internal...

We examine how division managers' human capital affects internal capital allocation using a hand-collected data set of divisional managers at S&P 1,500 firms. Based on a novel measure of division-manager ability, we show that more able division managers receive substantially larger capital...

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We...

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We...

In an internal capital market, individual departments may compete for a share of the firm´s budget by engaging in wasteful influence activities. We show that firms with more levels of hierarchy may experience lower influence costs than less hierarchical firms, even though the former provide...

Understanding how internal capital and labor markets function sheds light on one of the most fundamental questions in economics: what determines the boundaries of the firm? This essay reviews the theoretical and empirical literature on internal capital markets and firm boundaries, focusing in...

Using theories of internal capital markets, this paper examines the link between financial market integration and the value of global diversification.Based on a sample of 1,491 completed cross-border mergers and acquisitions (M&As) conducted by US acquirers during the 1990-2003 period, we find...

This Paper adopts an optimal contracting approach to internal capital markets. We study the role of headquarters in contracting with outside investors, with a focus on whether headquarters eases or amplifies financing constraints compared to decentralized firms where individual project managers...

This paper examines how foreign ownership affects the investment decisions of subsidiary firms using a new dataset of listed-parent − listed-subsidiary pairs. We find that improvements in the investment opportunities of parent firms have a negative effect on the investment of their...