Internal capital markets and investment decisions
Abstract
Purpose
This research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights and control as a factor explaining the effectiveness of investment management. The authors aim to apply the theory of the organizational architecture to the investment decision to understand its complexity and its efficiency.
Design/methodology/approach
An empirical test was realized on a sample of 63 Tunisian firms using the methods of canonical correlation and cross tabulations.
Findings
Even if organizational complexity has a linear and negative impact (opposite sign to what is expected) on the investment decision decentralization, which creates value, it appears that there is a positive association with the uncertainty of the environment, and a negative one with the scarcity and sharing of financial resources between units on the internal capital market.
Originality/value
The authors show that the role played by the internal capital market in the value creating requires the setting of a centralized organizational structure.
Keywords
Citation
Fakhfakh, H., Zouari, G. and Zouari‐Hadiji, R. (2012), "Internal capital markets and investment decisions", Corporate Governance, Vol. 12 No. 2, pp. 179-198. https://doi.org/10.1108/14720701211214070
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited