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File name: SSRN-id1530565. ; Size: 140K
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Corporate Governance and Internal Capital Markets
Zacharias Sautner
University of Amsterdam - University of Amsterdam Business School; Duisenberg School of Finance; Tinbergen Institute
Belen Villalonga
New York University (NYU) - Leonard N. Stern School of Business
January 2010
Harvard Business School Finance Working Paper No. 1530565
AFA 2011 Denver Meetings Paper
Abstract:
We exploit an exogenous shock to corporate ownership structures created by a recent tax reform in Germany to explore the link between corporate governance and internal capital markets. We find that firms with more concentrated ownership are less diversified and have more efficient internal capital markets. Our findings provide direct evidence in support of Scharfstein and Stein’s (2000) model, which suggests that internal capital misallocations are partly a result of poor corporate governance. We also provide evidence of a channel through which the benefits of ownership concentration outweigh its costs.
Number of Pages in PDF File: 47
Keywords: Corporate governance, internal capital markets, ownership, diversification
JEL Classification: G31, G32, G34
working papers series
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Date posted: January 3, 2010
; Last revised: June 7, 2010
Suggested CitationSautner, Zacharias and Villalonga, Belen, Corporate Governance and Internal Capital Markets (January 2010). Harvard Business School Finance Working Paper No. 1530565; AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1530565 or http://dx.doi.org/10.2139/ssrn.1530565
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