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Internal capital market efficiency of Belgian holding companies

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  • GAUTIER, Axel
  • HAMADI, Malika

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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Bibliographic 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: 00 Dec 2004
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Handle: RePEc:cor:louvco:2004086

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Keywords: investment; holding; internal capital market;

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References

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  1. Brusco, Sandro & Panunzi, Fausto, 2000. "Reallocation of Corporate Resources and Managerial Incentives in Internal Capital Markets," CEPR Discussion Papers 2532, C.E.P.R. Discussion Papers.
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Cited by:
  1. Ronald Anderson & Malika Hamadi, 2007. "Ownership, Control and Liquidity," LSF Research Working Paper Series 07-08, Luxembourg School of Finance, University of Luxembourg.
  2. Domenico Scalera & Alberto Zazzaro, 2009. "Do Inter-Firm Networks Make Access to Finance Easier? Issues and Empirical Evidence," Mo.Fi.R. Working Papers 25, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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