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| Author: | Stein, J. C. |
| Title: | Internal capital markets and the competition for corporate resources. |
| Journal: | Journal of Finance
1997 : MAR, VOL. 52:1, p. 111-133 |
| Index terms: | COMPANIES EXECUTIVES MANAGEMENT STRUCTURE INTERNAL CONTROL COMPANY CONTROL CAPITAL UTILIZATION |
| Language: | eng |
| Abstract: | This article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market. Unlike a bank, headquarters has control rights that enable it to engage in "winner-picking" - the practice of actively shifting funds from one project to another. By doing a good job in the winner-picking dimension, headquarters can create value even when it cannot help at all to relax overall firm-wide credit constraints. The model implies that internal capital markets may sometimes funtion more efficiently when headquarters oversees a small and focused set of projects. |
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