Internal Capital Market Efficiency of Belgian Holding Companies

CORE Discussion Paper No. 2004/86

22 Pages Posted: 15 Apr 2005

See all articles by Axel Gautier

Axel Gautier

University of Liège - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Malika Hamadi

Surrey Business School

Date Written: December 2004

Abstract

In this paper, we raise the following two questions: (1) do Belgian holding companies operate an internal capital market to transfer financial resources in between their subsidiaries? And if yes, (2) is the internal capital market efficient? To answer the first question, we check if the group cash flow is a determinant of the investment's spending of group members. The answer is positive if the holding's subsidiary is affiliated to a coordinate center and negative otherwise. To answer the second question, we evaluate if internal transfers are driven by efficiency. From our estimations, we cannot conclude that Belgian Holding companies have an efficient internal capital market.

Keywords: Investment, Holding, Internal capital market

JEL Classification: G31

Suggested Citation

Gautier, Axel and Hamadi, Malika, Internal Capital Market Efficiency of Belgian Holding Companies (December 2004). CORE Discussion Paper No. 2004/86, Available at SSRN: https://ssrn.com/abstract=688921 or http://dx.doi.org/10.2139/ssrn.688921

Axel Gautier (Contact Author)

University of Liège - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

Malika Hamadi

Surrey Business School

Surrey Business School
Guildford, Surrey GU2 7XH
United Kingdom

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