Internal Capital Markets: The Bright Side of Corporate Politics
This study looks inside the internal capital market of a large retail-banking group to study how internal corporate politics affect internal capital allocation. Our data is from the firm’s internal managerial accounting system and covers all internal capital transfers, investments and cash flows at the local member bank level. We find some evidence that member banks’ investments (loans) are not fully independent from their own cash flows (deposits). However, such inefficiencies are not apparent at more powerful member banks: they get more funds from the headquarters, but also restrain from overinvestment when experiencing large deposit inflows. This effect of power is stronger for banks with more volatile deposit growth, where better information flow between the banks and the headquarters may be more important. It is also stronger for small business loans, which contain more soft information than, for example, residential mortgage loans. These results suggest that internal politics and power inside an organization may have a ‘bright side’ in overcoming asymmetric information problems within the firm, by improving information flow between member banks and the headquarters.
Martijn Cremers Rocco Huang Zacharias Sautner
International Center for Finance Yale School of Management 135 Prospect Street New Haven, CT 06520 U Federal Reserve Bank of Philadelphia Ten Independence Mall Philadelphia, PA 19106-1574 United States University of Amsterdam Finance Group Roetersstraat 11 1018WB Amsterdam The Netherlands
国际会议
广州
英文
1-52
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）