The Economic Impact of Corporate Capital Expenditures: Focused Firms versus Diversified Firms

2006 ◽  
Vol 41 (2) ◽  
pp. 341-355 ◽  
Author(s):  
Sheng-Syan Chen
Keyword(s):  
Economic Impact ◽  
Capital Markets ◽  
Operating Performance ◽  
Capital Expenditures ◽  
Internal Capital Markets ◽  
Capital Investments ◽  
Corporate Capital ◽  
Investment Opportunities ◽  
Diversified Firms

AbstractThis paper examines the role of focus versus diversification in explaining the economic impact of corporate capital investments. I find that the stock market's responses to announcements of capital investments are more favorable for focused firms than for diversified firms. I also show that focused firms exhibit significantly better post-investment operating performance than diversified firms. The overall findings in this study suggest that the investment opportunities hypothesis dominates the internal capital markets hypothesis in terms of the net economic impact of capital investments on the investing firms.

Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation*

2019 ◽  
Vol 24 (4) ◽  
pp. 773-811 ◽  
Author(s):  
Raffaele Santioni ◽  
Fabio Schiantarelli ◽  
Philip E Strahan
Keyword(s):  
Cash Flow ◽  
Capital Markets ◽  
Capital Market ◽  
Cash Transfers ◽  
Internal Capital Markets ◽  
Group Affiliation ◽  
Internal Capital Market ◽  
Investment Opportunities ◽  
Internal Capital ◽  
Better Than

Abstract Firms affiliated with business groups survive the stress of the global financial and euro crises better than unaffiliated firms. Using granular data from Italy, we show that better performance stems partly from access to an internal capital market, as the survival value of group-affiliated firms increases with group-wide cash flow. Internal cash transfers increase when banks’ health deteriorates, with funds moving from cash-rich to cash-poor firms and, some evidence suggests, to firms with favorable investment opportunities. Internal capital markets’ role thus increases when external markets (banks) are distressed.

Democratizing Investment

2019 ◽  
Vol 47 (4) ◽  
pp. 573-591 ◽  
Author(s):  
Lenore Palladino
Keyword(s):  
Capital Markets ◽  
Public Investment ◽  
Private Companies ◽  
Public And Private ◽  
The Public ◽  
Racial Wealth Gap ◽  
Investment Opportunities ◽  
New Policies ◽  
Distributed Technologies

Americans have trillions of dollars invested in public and private companies, yet stock ownership is highly unequal: the wealthiest 1 percent of households possess 40 percent of all wealth, and there is a large and persistent racial wealth gap. What if innovations in distributed technologies allowed for democratic facilitation of new opportunities for wealth and a rebalancing of power within the capital markets? This article proposes using innovative financial technologies to create a “Public Investment Platform”—a public option for participation in capital markets—and a “Public Investment Account” to universalize access to investment opportunities. Capital markets are currently governed by public policies that submerge the role of the public in structuring them and enable an inequitable accumulation of wealth. To democratize finance, new policies are required to democratize participation in investment.

Why Does Equity Capital Flow out of High Tobin’s $\boldsymbol{q}$ Industries?

2020 ◽  
Author(s):  
Dong Wook Lee ◽  
Hyun-Han Shin ◽  
René M Stulz
Keyword(s):  
Cross Section ◽  
Capital Markets ◽  
Capital Flows ◽  
Equity Capital ◽  
Capital Expenditures ◽  
Stock Repurchases ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
High Q ◽  
Investment Opportunities

Abstract High Tobin’s $q$ industries receive more funding from capital markets than low Tobin’s $q$ industries from 1971 to 1996. Since then, the opposite is true. The key to understanding this shift is that large firms, for which $q$ is more a proxy for rents than investment opportunities, have become more important within industries. For these firms, repurchases but not capital expenditures increase in the cross-section with $q$, so that $q$ explains the variation of repurchases more than of capital expenditures. Consequently, equity capital flows out of high $q$ industries because for these industries stock repurchases are high and issuances are low.

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