Abstract
Using segment information from Compustat, we find that the investment by a segment of a diversified firm depends on the cash flow of the firm's other segments, but significantly less than it depends on its own cash flow. The investment by segments of highly diversified firms is less sensitive to their cash flow than the investment of comparable single-segment firms. The sensitivity of a segment's investment to the cash flow of other segments does not depend on whether its investment opportunities are better than those of the firm's other segments.
Keywords
Cash flowInvestment (military)BusinessMonetary economicsOperating cash flowFlow (mathematics)FinanceEconomicsGeometryMathematics
Affiliated Institutions
Related Publications
Financing Constraints and Corporate Investment: Response to Kaplan and Zingales
Kaplan and Zingales (1995, hereafter KZ) criticize Fazzari, Hubbard and Petersen (1988, hereafter FHP) and much ensuing research that uses cross-sectional differences in firm be...
Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?
No. This paper investigates the relationship between financing constraints and investment-cash flow sensitivities by analyzing the firms identified by Fazzari, Hubbard, and Pete...
Returns to bidding firms in mergers and acquisitions: Reconsidering the relatedness hypothesis
Recent work has suggested that mergers or acquisitions between strategically related firms will generate abnormal returns for shareholders of bidding firms. Empirical evidence o...
Capital Investments and Stock Returns
Abstract Firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. The negative abnormal capital investment/return relation...
Multifactor Explanations of Asset Pricing Anomalies
ABSTRACT Previous work shows that average returns on common stocks are related to firm characteristics like size, earnings/price, cash flow/price, book‐to‐market equity, past sa...
Publication Info
- Year
- 1998
- Type
- article
- Volume
- 113
- Issue
- 2
- Pages
- 531-552
- Citations
- 1115
- Access
- Closed
External Links
Social Impact
Altmetric
PlumX Metrics
Social media, news, blog, policy document mentions
Citation Metrics
1115
OpenAlex
69
Influential
780
CrossRef
Cite This
Hyun Han Shin,
René M. Stulz
(1998).
Are Internal capital Markets Efficient?.
The Quarterly Journal of Economics
, 113
(2)
, 531-552.
https://doi.org/10.1162/003355398555676
Identifiers
- DOI
- 10.1162/003355398555676