The Economics of Capital Allocation in Firms: Evidence from Internal Capital Markets

The authors thank Christian Homburg, Oguzhan Ozbas, Jeremy Stein, Timotheus Höttges (CEO Deutsche Telekom), and Richard Lutz (CEO Deutsche Bahn) for insightful comments on the survey instrument; Andreas Benz, who provided highly valuable input and support during many stages of the paper; the associate editor, two anonymous referees, Renée Adams, Tobias Berg, Demian Berchtold, Jim Brau, Philip Bromiley, Dirk Brounen, Ralf Ewert, Stan Fawcett, John Graham, Stefan Hirth, Christian Laux, Alberto Moel, Christine Parlour, Gordon Phillips, Ryan Riordan, Zacharias Sautner, Michael Troege, Marliese Uhrig-Homburg, David Young, and Michael Weber for their support and their detailed and insightful comments; the financial executives who pretested the survey instrument; and all the CFOs who took the time to fill out the survey and shared their insights into capital allocation. Parts of the study were conducted while D. Hoang was visiting the Haas School of Business at University of California, Berkeley, under a grant from the Karlsruhe House of Young Scientists. Parts of the results in this paper have previously circulated under the title “Internal Capital Markets and Diversified Firms: Theory and Practice” (Gatzer et al. 2014).