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Internal And External Capital Markets
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Book Synopsis Internal and External Capital Markets by : Urs Peyer
Download or read book Internal and External Capital Markets written by Urs Peyer and published by . This book was released on 2002 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study tests the proposition that firms that make efficient use of their internal capital markets can lower the cost of transacting in the external capital market. Using a large panel data set of diversified firms from 1980-1998, I show that diversified firms with an efficient internal capital allocation display a higher propensity to use external capital relative to comparable single segment firms. This result is robust to including other controls, such as measures of information asymmetry, capital needs, relative valuation and firm size. Further, a higher use of external capital by diversified firms relative to single segment firms is associated with a higher excess value, but only for efficient internal capital market users. I also demonstrate the robustness of these findings by employing a sample of firms that experience an increase in expected investment outlays. My findings support predictions from theoretical models, such as Stein (1997), and are consistent with the interpretation that diversified firms with an efficient internal capital market benefit from lower-cost access to external capital by alleviating information asymmetry problems between managers and investors.
Book Synopsis Internal Versus External Capital Markets by : Robert H. Gertner
Download or read book Internal Versus External Capital Markets written by Robert H. Gertner and published by . This book was released on 1994 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a framework for analyzing the costs and benefits of internal vs. external capital allocation. We focus primarily on comparing an internal capital market to bank lending. While both represent centralized forms of financing, in the former case the financing is owner-provided, while in the latter case it is not. We argue that the ownership aspect of internal capital allocation has three important consequences: 1) it leads to more monitoring than bank lending; 2) it reduces managers' entrepreneurial incentives; and 3) it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management.
Book Synopsis Managerial Incentives and Internal Capital Markets by : Adolfo de Motta
Download or read book Managerial Incentives and Internal Capital Markets written by Adolfo de Motta and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital budgeting in multidivisional firms depends on the external assessment of the whole firm, as well as on headquarters' assessment of the divisions. While corporate headquarters may create value by directly monitoring divisions, the external assessment of the firm is a public good for division managers who, consequently, are tempted to free ride. As the number of divisions increases, the free-rider problem is aggravated, and internal capital markets substitute for external capital markets in the provision of managerial incentives. The analysis relates the value of diversification to characteristics of the firm, the industry, and the capital market.
Book Synopsis A critical View on the Usage of Data from Capital Markets for Group Control by : Martin Renze-Westendorf
Download or read book A critical View on the Usage of Data from Capital Markets for Group Control written by Martin Renze-Westendorf and published by GRIN Verlag. This book was released on 2006-07-29 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2005 in the subject Business economics - Controlling, grade: 1,0, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: Questions in the field of group control are increasingly important in today’s economic environment. This development is especially driven by the fact that almost 90% of the German public companies and around 50% of the German limited liabilities companies are organized as groups. These structures imply information asymmetries and higher coordination requirements because commonly the parent company is responsible for strategic decisions while the subsidiary is responsible for the operations. As decentralized structures are gaining importance and the complexity of the company’s environment is growing, the group control faces new challenges and increasing importance for the management. In its aim to supply rationality assurance to the management it needs to work effective and efficient using a set of control tools. The basic data can be retrieved internally or externally. Especially, in the case of listed subsidiaries the data provided by capital markets seem to be a very simple solution for the problem of information gathering and processing in a complex environment. Hence the following research questions arise: How can a holding control its listed subsidiaries through data from capital markets? What could be rationality deficits and limitation in the application of data from capital markets? Beginning with basic definitions the paper defines management control to lay the basis of the examination and to determine the point of view. The holding is the entity that group control is located in. Capital market data in group control is the theme of this paper and those two terms need to be defined properly. Group control is defined in respect to rationality assurance, so it must be distinguished between external and internal institutions of rationality assurance. The internal institution includes a description of the functions and tasks of the controller. Control instruments are the tools used by the controller to process capital market data in group control. The main part is assessing the theory of the utilization of capital market data in group control. The first step is to ex-amine the aims of the application of capital market data, which are effectiveness and efficiency. In the second step different forms of application of capital market data in group control are assessed by looking at selected control instruments. They are grouped by their employment in the tasks of the controller, which are information, planning and control, and coordination. [...]
Book Synopsis The use of internal Capital Markets based on the example of Next & New Look by : Moritz Meyer
Download or read book The use of internal Capital Markets based on the example of Next & New Look written by Moritz Meyer and published by GRIN Verlag. This book was released on 2018-06-12 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: Scientific Study from the year 2018 in the subject Economics - Finance, grade: 80%, University of Strathclyde, language: English, abstract: This report tries to examine New Look's decision for the new acquirement by analysing the firm's performance in the last five years, internal capital markets (ICM), corporate governance and ownership structure, as well as advantages and disadvantages of acquiring a firm backed by a PE investor. Finally, the last element of the analysis is the evaluation of the benefits and costs of New Look as a standalone firm, if Brait would undertake successfully an initial public offering (IPO) process to exit from New Look. In the conclusion, we provide a recommendation for the exit strategy of Brait from New Look, if the objective is either to maximise the return to the Limited Partners (LPs) or Brait acts in the best interests of New Look. New Look Retail Group Limited (New Look) is an international multichannel retail brand, offering value-fashion for women, men, and teenage girls. The company has more than 900 stores, which are mostly based in the United Kingdom (UK). Its e-commerce grew sustainably over the last years and serves customers in 120 countries worldwide. Since 2015, New Look is owned by Brait Societas Europaea (Brait), a private equity (PE) firm. It is now rumoured that the UK based retailer Next Public Limited Company (Next) is preparing a takeover bid for New Look.
Book Synopsis Exploitation of the Internal Capital Market and the Avoidance of Outside Monitoring by : Brandon N. Cline
Download or read book Exploitation of the Internal Capital Market and the Avoidance of Outside Monitoring written by Brandon N. Cline and published by . This book was released on 2015 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Internal capital markets (ICMs) provide firms an alternative to costly external financing; however, they also provide an avenue to avoid the monitoring associated with issuing external capital. We argue that firms operating inefficient internal capital markets will avoid outside financing. Consistent with this view, conglomerates that cross-subsidize divisions or engage in value-destroying investment avoid external capital market oversight by refraining from issuing both debt and equity. We further show that firms issuing bonds while engaging in value-destroying investment experience yield spreads that are, on average, 46 basis points higher than that of other diversified firms. They similarly experience yield spreads that are 18 basis points higher when they issue syndicated loans. Value-destroying conglomerates also witness SEO announcement returns that are, on average, 1% more negative than firms operating more efficient internal capital markets.
Book Synopsis Financial Liberalization and the Internal Structure of Capital Markets in Asia and Latin America by : Miguel Urrutia
Download or read book Financial Liberalization and the Internal Structure of Capital Markets in Asia and Latin America written by Miguel Urrutia and published by United Nations University Press. This book was released on 1988 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook of the Economics of Finance by : G. Constantinides
Download or read book Handbook of the Economics of Finance written by G. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.
Book Synopsis Internal Capital Markets in Business Groups by : Krislert Samphantharak
Download or read book Internal Capital Markets in Business Groups written by Krislert Samphantharak and published by . This book was released on 2003 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Research Handbook on Mergers and Acquisitions by : Claire A. Hill
Download or read book Research Handbook on Mergers and Acquisitions written by Claire A. Hill and published by Edward Elgar Publishing. This book was released on 2016-09-30 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global in scope and written by leading scholars in the field, the Research Handbook on Mergers and Acquisitions is a modern-day survey of the state of M&A. Its chapters explore the history of mergers and acquisitions and also consider the theory behind the structure of modern transaction documentation. The book also address other key M&A issues, such as takeover defenses; judges and practitioners' perspectives on litigation; the appraisal remedy and other aspects of Federal and state law, as well as M&A considerations in the structure of start-ups. This Handbook will be an invaluable resource for scholars, practitioners, judges and legislators.
Book Synopsis Resource Allocation Within Firms and Financial Market Dislocation by : Gregor Matvos
Download or read book Resource Allocation Within Firms and Financial Market Dislocation written by Gregor Matvos and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "When external capital markets are stressed they may not reallocate resources between firms. We show that resource allocation within firms' internal capital markets provides an important force countervailing financial market dislocation. Using data on US conglomerates we empirically verify that firms shift resources between industries in response to shocks to the financial sector. We estimate a structural model of internal capital market to separately identify and quantify the forces driving the reallocation decision and how these forces interact with external capital market stress. The frictions in internal capital markets drive a large wedge between productivity and investment: the weaker (stronger) division obtains too much (little) capital, as though it is 12 (9) percent more (less) productive than it really is. The cost of accessing external capital funds quadruple during extreme financial market dislocations, making resource allocation within firms significantly cheaper. The estimated model allows us to simulate the propagation of the 2007/2008 financial market dislocation. The counterfactual out of sample simulated data is remarkably consistent with the actual data and shows that improved resource allocation in internal capital markets offset financial market stress during the recent financial crisis by 16% to 30% relative to firms with no internal capital markets"--National Bureau of Economic Research web site
Book Synopsis Internal Capital Markets and Corporate Refocusing by : John G. Matsusaka
Download or read book Internal Capital Markets and Corporate Refocusing written by John G. Matsusaka and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a theory of organization based on the benefits and costs of internal capital markets. A central assumption is that the transaction cost of raising external funds is greater than the cost of internal funds. The benefit of internal resource allocation is that it gives the firm a real option to avoid external capital markets (and the associated deadweight transaction costs) in more states of the world than single-business firms. The cost is the internal resource flexibility exacerbates an over investment agency problem. The optimal focus is determined by trading off the benefit of the option against the cost of over investment. In this context, we show how the relative efficiency of integration and separation depends ultimately on assignment of control rights over cash flow. Testable implications are derived for the level of divisional investment, the sensitivity of divisional investment to cash flow, and the diversification discount.
Book Synopsis Internal Versus External Capital Markets in the Insurance Industry by : Lawrence S. Powell
Download or read book Internal Versus External Capital Markets in the Insurance Industry written by Lawrence S. Powell and published by . This book was released on 2006 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study compares internal and external sources of capital in the insurance industry by analyzing reinsurance activity between affiliated and unaffiliated insurers. Tests are performed using data from a large sample of property-liability insurers that are affiliated with at least one other property-liability insurer. Results indicate that while demands for internal and external reinsurance have some factors in common, there are cost-based differences in internal and external capital, as well as structural differences in the use of internal and external reinsurance. Results are consistent with previous theories related to internal versus external capital markets.
Book Synopsis Financial Constraints and Investment Efficiency by : Gayané Hovakimian
Download or read book Financial Constraints and Investment Efficiency written by Gayané Hovakimian and published by . This book was released on 2010 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: The extent to which conglomerates face frictions in external capital markets has implications for their internal capital allocation. We find that, during recessions, when external financing costs are higher, conglomerates improve the efficiency of internal capital markets by increasing the allocation of funds to high q divisions relative to low q divisions. The improvement is significantly higher for conglomerates that are likely to face more binding financial constraints. This evidence suggests that although financial constraints impair managers' ability to undertake positive net present value projects, they improve the quality of project selection by reducing free cash flow and pressuring managers to fund the more valuable investment opportunities. It is consistent with theories stressing the benefits of internal capital markets in the presence of external capital market imperfections.
Book Synopsis Corporate Diversification and Internal Capital Markets by : Halit Gonenc
Download or read book Corporate Diversification and Internal Capital Markets written by Halit Gonenc and published by . This book was released on 2006 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare the performance of firms affiliated with diversified business groups with the performance of unaffiliated firms in an emerging market, Turkey. Our findings indicate that group affiliation improves firm's accounting performance, but not stock market performance. Furthermore, we find that firm's accounting (but not stock market) performance increases with the level of group diversification. Our results also indicate that having a group affiliated bank affects the accounting performance measures of the group firms positively, but the market value of the group affiliated firms negatively, supporting the misallocation of capital hypothesis. In addition, having a group affiliated media institution is found to affect the performance of the group firms positively. More importantly, we examine the frequency of seasoned equity issue offerings with the forms of cash (right and restricted right) issues and bonus issues to address the question of whether group affiliated firms create an internal capital market. We show that unaffiliated firms are more bound to external markets to raise capital while the affiliated firms use internal capital markets.The views expressed in these papers are those of the author(s), they do not reflect the opinions of LECG, LLC and should not be construed as representing the positions of other experts at LECG, LLC.
Book Synopsis Information Resolution and Subnational Capital Markets by : Christine R. Martell
Download or read book Information Resolution and Subnational Capital Markets written by Christine R. Martell and published by Oxford University Press. This book was released on 2021-08-10 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive explanation of information institutions as they relate to the success of subnational capital markets Global trends in decentralization and the growing role of world cities have increased the importance of infrastructure development. But with competing incentives of suppliers and borrowers of capital in the web of institutional governance arrangements, information problems are inevitable. Understanding how local choices affect these larger trends can help national and city actors not just avoid being paralyzed by information problems, but actually improve information resolution. In this book Christine R. Martell, Tima Moldogaziev, Salvador Espinosa argue that capital markets are a viable financing alternative for subnational borrowers. They explain how subnational governments can manage their fiscal and debt choices to leverage capital markets to finance efficient, effective, and equitable infrastructure provision. The book builds on previous work by exploring the role of information institutions as they relate to the success of subnational capital markets and by advancing options for subnational government to gain agency as active market participants. With broad geographic coverage, Information Resolution and Subnational Capital Markets answers core questions: How does information permeate the landscape and outcomes of subnational government borrowing, both at the aggregate national level and at the city level? What measures and mechanisms can national and subnational governments take to resolve information problems? And, what can cities do to enhance their agency vis-à-vis central governments and capital market actors, so that they can command a voice in managing internal and external sources of capital financing?
Book Synopsis Asymmetric Information in External and Internal Capital Markets by : Florian Heider
Download or read book Asymmetric Information in External and Internal Capital Markets written by Florian Heider and published by . This book was released on 2001 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:
