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Internal Capital Market Efficiency of Belgian Holding Companies

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  • Axel Gautier
  • Malika Hamadi

Abstract

In this paper, we raise the following two questions. (1) Do Belgian holding companies operate an internal capital market to transfer financial resources amongst their subsidiaries? And if yes, (2) is the internal capital market efficient? To answer the first question, we check if group cash flow is a determinant of the group members investment spending. The answer is positive if the holding company?s subsidiary is affiliated to a coordination 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.

Suggested Citation

  • Axel Gautier & Malika Hamadi, 2005. "Internal Capital Market Efficiency of Belgian Holding Companies," Finance, Presses universitaires de Grenoble, vol. 26(2), pages 11-34.
    • Handle: RePEc:cai:finpug:fina_262_0011
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    Cited by:

    1. 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.
    2. Anaïs HAMELIN, 2013. "Does Size Matter? Firm And Business Group Size Influence On The Benefits Of Group Affiliation," Working Papers of LaRGE Research Center 2013-10, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    3. Ronald Anderson & Malika Hamadi, 2007. "Ownership, Control and Liquidity," LSF Research Working Paper Series 07-08, Luxembourg School of Finance, University of Luxembourg.

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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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