Download or read book Internal Capital Markets and Firm Level Compensation Incentives for Division Managers written by Julie Wulf and published by . This book was released on 2005 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do multi-divisional firms structure compensation contracts for division managers to mitigate information and incentive problems in their internal capital markets? Using Compustat Segment financial data and compensation data from a proprietary survey, I find evidence that compensation and investment incentives are substitutes: firms providing a stronger link to firm performance in incentive compensation for division managers also provide weaker investment incentives through the capital budgeting process. Specifically, as the proportion of incentive pay for division managers that is based on firm performance increases, division investment is less responsive to division profitability. While these findings may be consistent with other explanations, they are generally consistent with a model of influence activities by division managers and the implied relative weights placed on imperfect, objective signals (i.e. accounting measures) versus distortable, subjective signals (i.e. manager recommendations) in inter-divisional capital allocation decisions.

Download or read book Reallocation of Corporate Resources and Managerial Incentives in Internal Capital Markets written by Sandro Brusco and published by . This book was released on 2000 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Incentives in Internal Capital Markets written by Roman Inderst and published by . This book was released on 2002 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers the effect of competition for scarce financial resources on managers' incentives to generate profitable investment opportunities. Competition is only unambiguously beneficial if projects are symmetric. If divisions differ in their cash endowments or their growth potential, integration may reduce incentives for some managers, which may lower total firm value. Moreover, relaxing capital constraints, e.g., by integrating a cash cow project, may reduce incentives.We treat two different scenarios where contracts can either only specify monetary incentives or additionally the allocation of funds. While distorted capital allocations increase managers' incentives, they only survive renegotiations in integrated firms.

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.

Download or read book Reallocation of Corporate Resources and Managerial Incentives in Internal Capital Markets written by Sandro Brusco and published by . This book was released on 2004 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diversified firms often trade at a discount with respect to their focused counterparts. The literature has tried to explain the apparent misallocation of resources with lobbying activities or power struggles. We show that diversification can destroy value even when resources are efficiently allocated ex post. When managers derive utility from the funds under their purview, moving funds across divisions may diminish their incentives. The ex ante reduction in managerial incentives can more than offset the increase in firm value due to the ex post efficient reallocation of funds. This effect is robust to the introduction of monetary incentives. We apply our model to the analysis of the optimal reallocation policy and to the effect of the asymmetry among divisions. In general it is optimal for headquarters to commit not to reallocate at least a fraction of funds. As a result, the investment in a given division is more sensitive to the division's cash flow than to other divisions' cash flow. Asymmetries in size and growth prospects increase the diversification discount.

Download or read book What Do Internal Capital Markets Do written by Axel Gautier and published by . This book was released on 2001 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Incentives in Internal Capital Markets written by Roman Inderst and published by . This book was released on 2000 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Reallocation of Corporate Resources and Managerial Incentive in Internal Capital Markets written by Sandro Brusco and published by . This book was released on 2000 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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.

Download or read book Reallocation of Corporate Resources and Managerial Incentives in Internal Capital Markets Paper Presented at CESIFO Area Conference on Industrial Organisation April 2002 written by and published by . This book was released on 2002 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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.

Download or read book Internal Capital Markets Cross subsidization and Product Market Competition written by Giacinta Cestone and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Internal Capital Markets in the U S Property Liability Insurance Industry written by Jiyun Lydia Lim and published by . This book was released on 2019 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first part of the dissertation examines whether M&As are related to internal capital markets by analyzing the changes in internal capital market utilization following M&As in the U.S. property-liability insurance industry during the period 2000-2015. The results suggest that both acquiring insurers and targets increase internal reinsurance and undergo more intragroup capital transactions after the M&A. The probit analysis provides evidence that insurers with low internal capital market utilization via reinsurance are more likely to engage in M&As as an acquirer or a target. This indicates that acquiring insurers with small internal capital markets have an incentive in making acquisitions to expand their internal capital markets. This study finds empirical evidence that internal capital market use is one of the determinants of M&As by utilizing internal transaction data of U.S. property-liability insurers. The second part of the dissertation investigates the relationship between executive compensation and internal capital market efficiency in the U.S. property-liability insurance industry for the period 2000-2015. The results indicate that executive compensation has a significant and positive influence on the efficiency of internal capital allocation. An executive's incentive for efficient internal capital allocation is different depending on the type of compensation, the size of internal capital markets, and external events such as the global financial crisis. These findings are robust to corrections for potential endogeneity bias. I also find evidence of a non-linear relationship between efficiency and the size of internal capital markets. Internal capital markets should continue to expand as long as the benefit of relaxing credit constraints is greater than the cost of managing larger internal capital markets. Overall, the result of the study is consistent with the view that better alignment of executive incentives with shareholder interests leads to efficient internal capital allocation.

Download or read book Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks written by Ms.Yu Shi and published by International Monetary Fund. This book was released on 2019-05-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.

Download or read book The New Capital Adequacy Framework written by Cem Karacadag and published by . This book was released on 2000 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Impact of Capital Markets on Compensation Incentives Organizational Slack and Firm Innovation written by Michael N. Young and published by . This book was released on 1999 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Internal Capital Markets in Diversified Firms written by Julia Liebeskind and published by . This book was released on 1990 with total page 330 pages. Available in PDF, EPUB and Kindle. Book excerpt: