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The economics of capital allocation in firms : Evidence from internal capital markets

Hoang, Daniel; Gatzer, Sebastian; Ruckes, Martin

We analyze a unique survey dataset to examine the (micro)foundations of capital allocation in firms. Firms employ systems of interconnected measures to counteract agency problems, including layers of approval, divisional budgets, reporting requirements, and compensation schemes. When making funding decisions, top management relies heavily on top-level, nonfinancial information. However, substantial parts of the capital budget do not require top management approval as firms trade off the benefits and costs of decentralization. Even firms with active internal capital markets tilt capital allocation toward relatively even distributions. Within-firm agency problems may result in divisions’ restricted access to internal capital.

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Volltext §
DOI: 10.5445/IR/1000079886
Veröffentlicht am 02.02.2018
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Forschungsbericht/Preprint
Publikationsjahr 2018
Sprache Englisch
Identifikator ISSN: 2190-9806
KITopen-ID: 1000079886
Verlag KIT, Karlsruhe
Umfang 55 S.
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