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CFO power and internal capital allocation in business groups

Author

Listed:
  • Tan, Wenhao
  • Zhang, Jinnan
  • Yu, Zhiyang
  • Xu, Lili
  • Xue, Jiayi

Abstract

We examine the impact of CFO power on the internal capital market within corporate governance structures. Using panel data from the operation of internal capital markets among Chinese A-share business groups from 2008 to 2021, we find that stronger CFO power drives a significant increase in the activity of the internal capital market. Further analysis reveals that this positive effect is more pronounced in firms with higher fraction of counter-balancing ownership, stronger CEO power, and higher institutional ownership. Additional tests on economic consequences indicate that enhanced CFO power leads to significantly improved corporate investment efficiency. These findings contribute to the literature on corporate governance and power theory, and offer practical implications for optimizing resource allocation within business groups.

Suggested Citation

  • Tan, Wenhao & Zhang, Jinnan & Yu, Zhiyang & Xu, Lili & Xue, Jiayi, 2026. "CFO power and internal capital allocation in business groups," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x25003464
    DOI: 10.1016/j.pacfin.2025.103009
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    References listed on IDEAS

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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