Publications
Publications
- 2010
- HBS Working Paper Series
Corporate Governance and Internal Capital Markets
Abstract
We exploit an exogenous shock to corporate ownership structures created by a recent tax reform in Germany to explore the link between corporate governance and internal capital markets. We find that firms with more concentrated ownership are less diversified and have more efficient internal capital markets. Our findings provide direct evidence in support of Scharfstein and Stein's (2000) model, which suggests that internal capital misallocations are partly a result of poor corporate governance. We also provide evidence of a channel through which the benefits of ownership concentration outweigh its costs.
Keywords
Cost vs Benefits; Capital Markets; Corporate Governance; Taxation; Ownership; Performance Efficiency; Diversification; Germany
Citation
Sautner, Zacharias, and Belen Villalonga. "Corporate Governance and Internal Capital Markets." Harvard Business School Working Paper, No. 10-100, May 2010.