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Are Internal capital Markets Efficient?
Abstract
Using segment information from Compustat, we find that the investment by a segment of a diversified firm depends on the cash flow of the firm's other segments, but significantly less than it depends on its own cash flow. The investment by segments of highly diversified firms is less sensitive to their cash flow than the investment of comparable single-segment firms. The sensitivity of a segment's investment to the cash flow of other segments does not depend on whether its investment opportunities are better than those of the firm's other segments.
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Citations
Cited by
Global Diversification, Industrial Diversification, and Firm Value
Denis, D. J., Denis, D. K., & Yost, K. (2002) · The Journal of Finance · doi:10.1111/0022-1082.00485 · Cited by 1,049
Campello, M. (2002) · The Journal of Finance · doi:10.1111/1540-6261.00512 · Cited by 474
Segment Profitability and the Proprietary and Agency Costs of Disclosure
Berger, P. G., & Hann, R. N. (2007) · The Accounting Review · doi:10.2308/accr.2007.82.4.869 · Cited by 467
Is It Inefficient Investment that Causes the Diversification Discount?
Whited, T. M. (2001) · The Journal of Finance · doi:10.1111/0022-1082.00385 · Cited by 432
The Cost of Diversity: The Diversification Discount and Inefficient Investment
Rajan, R. G., Servaes, H., & Zingales, L. (1998) · SSRN Electronic Journal · doi:10.2139/ssrn.56108 · Cited by 409
Metadata
- Authors
- Shin, H.-H., & Stulz, R. M.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 1998-05-01
- Volume
- 113
- Issue
- 2
- Pages
- 531-552
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W1995320128
- Cited by
- 1,048
- References
- 0
- FWCI
- 147.06
- Type
- journal article
- Language
- en
- Open access
- closed
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- Shin, H.-H., & Stulz, R. M. (1998). Are Internal capital Markets Efficient? The Quarterly Journal of Economics. https://doi.org/10.1162/003355398555676
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Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
