We thank the editor, Robert Faff, two anonymous referees, and Terry Keasler for helpful comments.
Internal capital market subsidies and industry downturns
Article first published online: 6 MAY 2008
© 2007 The Authors. Journal compilation © 2007 AFAANZ
Accounting & Finance
Volume 48, Issue 3, pages 337–361, September 2008
How to Cite
Brown, C. A. and McNeil, C. R. (2008), Internal capital market subsidies and industry downturns. Accounting & Finance, 48: 337–361. doi: 10.1111/j.1467-629X.2007.00250.x
- Issue published online: 12 AUG 2008
- Article first published online: 6 MAY 2008
- Received 1 April 2007; accepted 22 September 2007 by Robert Faff (Editor).; doi: 10.1111/j.1467-629x.2007.00250.x
- Capital budgeting;
- Internal capital markets;
- Industry shock;
We examine whether multisegment firms tend to subsidize operations doing business in industries that experience a major downturn in investment opportunities. The results provide little evidence of subsidization. The likelihood of discontinuation of multisegment operations in these industries does not statistically differ from that of single-segment operations. Similarly, patterns of capital expenditures after the shock do not materially deviate between multisegment and single-segment operations. These results indicate that the internal capital markets of multisegment firms are no less (and no more) efficient than that of single-segment firms in their reaction to a shock to investment opportunities.