Internal Capital Market and Capital Misallocation: Evidence from Corporate Spinoffs
Description:
This study investigates the importance of reduced capital misallocation in explaining the gains in corporate spinoffs. The capital misallocation hypothesis asserts that the internal capital market of a diversified firm fails to meet the needs of the relatively low growth divisions for less investment and the needs of the relatively high growth divisions for more investment. Higher differences in growth opportunities imply that more capital is misallocated. This study finds that the higher the …
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Date:
August 2001
Creator:
Warganegara, Dezie L