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Internal capital market efficiency of Belgian holding companies

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Author Info
GAUTIER, Axel
HAMADI, Malika

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Abstract

In this paper, we raise the following two questions: (1) do Belgian holding companies operate an internal capital market to transfer financial resources in between their subsidiaries? And if yes, (2) is the internal capital market efficient? To answer the first question, we check if the group cash flow is a determinant of the investment's spending of group members. The answer is positive if the holding's subsidiary is affiliated to a coordinate center and negative otherwise. To answer the second question, we evaluate if internal transfers are driven by efficiency. From our estimations, we cannot conclude that Belgian Holding companies have an efficient internal capital market.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004086.

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Date of creation: 01 Dec 2004
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Handle: RePEc:cor:louvco:2004086

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Related research
Keywords: investment; holding; internal capital market;

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Find related papers by JEL classification:
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ronald Anderson & Malika Hamadi, 2007. "Ownership, Control and Liquidity," Working Papers of CREFI-LSF (Centre of Research in Finance - Luxembourg School of Finance) 07-08, CREFI-LSF, University of Luxembourg. [Downloadable!]
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