The Efficiency of Internal Capital Markets: Evidence from the Annual Capital Expenditure Survey

Abstract

The research program of the Center for Economic Studies (CES) produces a wide range of theoretical and empirical economic analyses that serve to improve the statistical programs of the U.S. Bureau of the Census. Many of these analyses take the form of CES research papers. The papers are intended to make the results of CES research available to economists and other interested parties in order to encourage discussion and obtain suggestions for revision before publication. The papers are unofficial and have not undergone the review accorded official Census Bureau publications.The opinions and conclusions expressed in the papers are those of the authors and do not necessarily represent those of the U.S. Bureau of the Census. Republication in whole or part must be cleared with the authors.

Firm Diversification and Performance: An Empirical Examination

“…There is widespread agreement that economic activity carried out within the boundaries of firms is quantitatively more significant, in terms of transactions, value added, and employment, than the ones conducted through markets (Walker 2017;Gertner and Scharfstein 2013;Lafontaine and Slade 2007). 2 The examination of diversified firms' behavior, and of the ICMs through which resources are allocated, has received a great deal of attention from economists (e.g., Glaser et al 2013;Maksimovic and Phillips 2013;Agarwal et al 2011). However, even today, and despite the theoretical arguments and the empirical findings on the allocative efficiency of diversified versus single-segment firms, the topic still remains a theoretical and empirical challenge for the economic analysis of business organizations.…”

Firm Diversification and Performance: An Empirical Examination

“…There is widespread agreement that economic activity carried out within the boundaries of firms is quantitatively more significant, in terms of transactions, value added, and employment, than the ones conducted through markets (Walker 2017;Gertner and Scharfstein 2013;Lafontaine and Slade 2007). 2 The examination of diversified firms' behavior, and of the ICMs through which resources are allocated, has received a great deal of attention from economists (e.g., Glaser et al 2013;Maksimovic and Phillips 2013;Agarwal et al 2011). However, even today, and despite the theoretical arguments and the empirical findings on the allocative efficiency of diversified versus single-segment firms, the topic still remains a theoretical and empirical challenge for the economic analysis of business organizations.…”

Does Internal Capital Market Membership Matter for Capital Allocation? Theory and Evidence from the Euro Area

“…Despite the extensive body of theoretical literature on the optimality of firms capital investment (e.g., Arrow 1964;Jorgenson 1963;and Hirshleifer 1958), the archetypal questions -«to what extent does capital get allocated to the right investment projects?» (Stein 2003), «does firm diversity result in an efficient or inefficient allocation of capital?» (Agarwal et al 2011), and «how do firms allocate resources across business units? Do units with better investment opportunities receive larger capital allocations and invest more?» (Glaser et.…”