The Experts below are selected from a list of 21897 Experts worldwide ranked by ideXlab platform

Dmytro Holod - One of the best experts on this subject based on the ideXlab platform.

  • Agency and Internal Capital Market Inefficiency: Evidence from Banking Organizations
    Financial Management, 2012
    Co-Authors: Dmytro Holod
    Abstract:

    Using banking data, I provide evidence that agency problems are at the root of Internal Capital Market inefficiency. I find that publicly traded bank holding companies (BHCs) are less efficient in their Internal Capital allocation than non-publicly traded BHCs. This suggests that the divergence of interests between the CEO and the shareholders is an important source of the Internal Capital misallocation. I also show that BHCs that have a tiered organizational structure are less efficient than non-tiered BHCs, but only within a sample of BHCs that are publicly traded. These findings imply that a greater degree of rent-seeking activity by the division manager contributes to the Internal Capital Market inefficiency only if the top manager herself is an agent. This is consistent with theoretical models that explain Internal Capital misallocations through the multiple layers of agency within an organization.

  • agency and Internal Capital Market inefficiency evidence from banking organizations
    Financial Management, 2012
    Co-Authors: Dmytro Holod
    Abstract:

    Using banking data, I provide evidence that agency problems are at the root of Internal Capital Market inefficiency. I find that publicly traded bank holding companies (BHCs) are less efficient in their Internal Capital allocation than nonpublicly traded BHCs. This suggests that the divergence of interests between the chief executive officer and the shareholders is an important source of the Internal Capital misallocation. I also demonstrate that BHCs incorporating a tiered organizational structure are less efficient than nontiered BHCs, but only within a sample of BHCs that are publicly traded. These findings imply that a greater degree of rent-seeking activity by division managers contributes to Internal Capital Market inefficiency only if the top manager is an agent. This is consistent with theoretical models that explain Internal Capital misallocations through the multiple layers of agency within an organization.

David C. Mauer - One of the best experts on this subject based on the ideXlab platform.

  • cross subsidies external financing constraints and the contribution of the Internal Capital Market to firm value
    Review of Financial Studies, 2003
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    We examine the link between the excess value of a diversified firm and the value of its Internal Capital Market. Subsidies to small financially constrained segments with good relative investment opportunities significantly increase excess value, while transfers of resources from segments with good relative investment opportunities significantly decrease excess value. Of interest is that subsidies to small financially constrained segments with poor relative investment opportunities also significantly increase excess value. However, there is little evidence that this result depends on the diversity of a firm's investment opportunities. We conclude that financing constraints drive the relationship between the Internal Capital Market and firm value. Copyright 2003, Oxford University Press.

  • Diversification and the value of Internal Capital Markets: The case of tracking stock
    Journal of Banking & Finance, 2000
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    Numerous studies document that diversified firms sell at a discount relative to comparable portfolios of stand-alone firms. One explanation is that these firms suboptimally invest by subsidizing poor performing business segments with resources from profitable business segments. On average, firms may indeed have Internal Capital Markets that diminish firm value; however, it is also possible that Internal Capital Markets add to firm value by relieving liquidity constraints. We examine the link between firm value and the value of Internal Capital Markets using a relatively new form of corporate restructuring called tracking stock. We present a model that illustrates that the announcement effect of a tracking stock equity restructuring conveys information about the Market's assessment of the value of a firm's Internal Capital Market. We develop a direct measure of the profitability of the Internal Capital Market, and we find a strong positive relation between it and tracking stock announcement effects, a finding consistent with our model.

  • Cross Subsidies, External Financing Constraints, and the Contribution of the Internal Capital Market to Firm Value
    SSRN Electronic Journal, 1998
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    This paper examines the link between the value of a diversified firm and the value of its Internal Capital. We construct measures of the value of Internal Capital Market transactions based on the dollar flow of subsidies and transfers across segments, the relative investment opportunities of segments, and the likelihood that a segment receiving a subsidy would face external financing constraints if it were a stand-alone firm. We find that specific components of a diversified firm's Internal Capital Market are important determinants of its excess value. Subsidies to small financially constrained segments with good relative investment opportunities significantly increase excess value, while transfers of resources from segments with good relative investment opportunities significantly decrease excess value. Surprisingly, subsidies to small financially constrained segments with poor relative investment opportunities also significantly increase excess value, albeit to a lesser extent than the subsidies to constrained segments with good relative investment opportunities. We conclude that financing constraints drive the relationship between the Internal Capital Market and firm value.

Matthew T. Billett - One of the best experts on this subject based on the ideXlab platform.

  • Internal Information Asymmetry, Internal Capital Markets, and Firm Value
    SSRN Electronic Journal, 2013
    Co-Authors: Matthew T. Billett, Chen Chen, Xiumin Martin, Xin Wang
    Abstract:

    We examine the effects of Internal information asymmetry between corporate headquarters and division managers on Internal Capital Market efficiency and firm value. Using a novel measure of Internal information asymmetry − the differential insider trading profit between division managers and top executives, we find a negative relation between Internal information asymmetry and both Internal Capital Market efficiency and firm value. These relations are more pronounced for firms with weaker corporate governance. Higher Internal information asymmetry also associates with a greater probability of divesting and with more positive shareholder wealth effects from refocusing events.

  • cross subsidies external financing constraints and the contribution of the Internal Capital Market to firm value
    Review of Financial Studies, 2003
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    We examine the link between the excess value of a diversified firm and the value of its Internal Capital Market. Subsidies to small financially constrained segments with good relative investment opportunities significantly increase excess value, while transfers of resources from segments with good relative investment opportunities significantly decrease excess value. Of interest is that subsidies to small financially constrained segments with poor relative investment opportunities also significantly increase excess value. However, there is little evidence that this result depends on the diversity of a firm's investment opportunities. We conclude that financing constraints drive the relationship between the Internal Capital Market and firm value. Copyright 2003, Oxford University Press.

  • Diversification and the value of Internal Capital Markets: The case of tracking stock
    Journal of Banking & Finance, 2000
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    Numerous studies document that diversified firms sell at a discount relative to comparable portfolios of stand-alone firms. One explanation is that these firms suboptimally invest by subsidizing poor performing business segments with resources from profitable business segments. On average, firms may indeed have Internal Capital Markets that diminish firm value; however, it is also possible that Internal Capital Markets add to firm value by relieving liquidity constraints. We examine the link between firm value and the value of Internal Capital Markets using a relatively new form of corporate restructuring called tracking stock. We present a model that illustrates that the announcement effect of a tracking stock equity restructuring conveys information about the Market's assessment of the value of a firm's Internal Capital Market. We develop a direct measure of the profitability of the Internal Capital Market, and we find a strong positive relation between it and tracking stock announcement effects, a finding consistent with our model.

  • Cross Subsidies, External Financing Constraints, and the Contribution of the Internal Capital Market to Firm Value
    SSRN Electronic Journal, 1998
    Co-Authors: Matthew T. Billett, David C. Mauer
    Abstract:

    This paper examines the link between the value of a diversified firm and the value of its Internal Capital. We construct measures of the value of Internal Capital Market transactions based on the dollar flow of subsidies and transfers across segments, the relative investment opportunities of segments, and the likelihood that a segment receiving a subsidy would face external financing constraints if it were a stand-alone firm. We find that specific components of a diversified firm's Internal Capital Market are important determinants of its excess value. Subsidies to small financially constrained segments with good relative investment opportunities significantly increase excess value, while transfers of resources from segments with good relative investment opportunities significantly decrease excess value. Surprisingly, subsidies to small financially constrained segments with poor relative investment opportunities also significantly increase excess value, albeit to a lesser extent than the subsidies to constrained segments with good relative investment opportunities. We conclude that financing constraints drive the relationship between the Internal Capital Market and firm value.

Greg Niehaus - One of the best experts on this subject based on the ideXlab platform.

  • managing Capital via Internal Capital Market transactions the case of life insurers
    Journal of Risk and Insurance, 2018
    Co-Authors: Greg Niehaus
    Abstract:

    The movement of Capital within insurance groups is important for understanding insolvency risk management, as well as regulatory policies regarding Capital standards and group supervision. Panel data estimates indicate that, on average, a dollar decrease in performance (net income plus unrealized Capital gains) when performance is negative is associated with a $0.26 increase in Capital contributions to life insurers from other entities in the group, and that a dollar increase in performance when performance is positive is associated with a $0.56 increase in the amount of Internal shareholder dividends paid by life insurers to other entities in the group. Moreover, the sensitivity of Internal dividends to performance is higher during the financial crisis than the noncrisis period. Also, insurers with low (high) risk†based Capital ratios receive more (less) Internal Capital contributions than other insurers, holding other factors constant.

  • managing Capital and insolvency risk via Internal Capital Market transactions the case of life insurers
    2014
    Co-Authors: Greg Niehaus
    Abstract:

    Understanding the movement of Capital between insurers and affiliated companies under common ownership is important for understanding insurer insolvency risk and the impact of regulatory policies regarding Capital standards and group supervision. Aggregate data indicate that life insurers received substantial Internal Capital contributions from other entities in their group and decreased the Internal shareholder dividends paid during the financial crisis. Panel data estimates indicate that, on average, a dollar decrease in net income when net income is negative is associated with a $0.32 increase in Capital contributions from other entities in the group, and that a dollar increase in net income when net income is positive is associated with a $0.56 increase in the amount of Internal shareholder dividends paid by the insurer to other entities in the group. Also, insurers with low (high) risk-based Capital ratios receive more (less) Internal Capital contributions than other insurers. While the sensitivity of Internal Capital movements to performance and Capitalization is concentrated in groups with a large number of affiliates, insurers in these groups do not on average, holding other factors constant, have lower Capital or lower liquidity ratios than insurers in groups with less active Internal Capital Markets.

Keliang Wang - One of the best experts on this subject based on the ideXlab platform.

  • Diversified Investment Strategy and the Operation of Internal Capital Market: The Moderating Effect of Corporate Governance Mechanism
    IEEE Access, 2019
    Co-Authors: Zhixia Cui, Xiangrui Meng, Xiangqian Wang, Keliang Wang
    Abstract:

    This paper aims to examine the relationship between diversified investment and the operation of the Internal Capital Market, and then further investigate the impact of corporate governance mechanism on the relationship between them. Using a sample of group-affiliated firms listed on the Shanghai and Shenzhen Stock Exchanges in China, from 2010 to 2017, we find that the operation of Internal Capital Market Granger-causes the diversified investment and both of them have a non-linear relationship. Moreover, we also find that four factors of corporate governance mechanism (the type of ownership, the fraction of independent directors, managerial ownership, and whether the CEO is also the chairman of the board) have different moderating effects on the relationship between diversified investment and the operation of Internal Capital Market. In addition, we conclude that the Internal Capital Market plays a central role in the diversified investment strategy and improving corporate governance mechanism helps strengthen the relationship between diversified investment and the operation of the Internal Capital Market.