Time-varying efficiency of internal capital markets
AuthorWang, Yolanda Yulong
Document TypePhD thesis
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© 2019 Dr. Yolanda Yulong Wang
This thesis examines the time-varying efficiency of diversified firms. The first essay documents flipped Q-sensitivity of investment of conglomerates over the business cycle. I find that the internal capital markets affect investment and cash retention differently from stand-alone firms. The result is robust to the degree of diversification, matching sample and difference-in-differences analyses. The second essay examines the effect of compensation incentives on intra-firm capital allocation, of both CEOs and divisional managers. I provide novel evidence that reconciles the efficiency explanation with the theory prediction that managers require extra incentives to relinquish capital in control and finance investment.
Keywordsdiversification; capital allocation; compensation incentives
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- Finance - Theses