Conglomerate internal informational advantage and resource allocation efficiency

Shih-Chu Chou (), Ramachandran Natarajan () and Kenneth Zheng ()
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Shih-Chu Chou: San Francisco State University
Ramachandran Natarajan: University of Texas at Dallas
Kenneth Zheng: University of Wyoming

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 2, No 10, 717-748

Abstract: Abstract Using financial data from a large sample of U.S. conglomerates, we find a significant and positive association between conglomerate informational advantage through internal information markets and resource allocation efficiency. Our finding suggests that the internal informational environment of conglomerates plays an important role in top management internal resource allocation decisions. Additional evidence shows that this positive association is more pronounced when internal competition for resources is higher, suggesting that internal competition elevates the importance of conglomerate informational advantage in internal resource allocation efficiency. Finally, this association is weaker when top management is more powerful, suggesting that powerful CEOs have access to alternative channels of information, which limits the usefulness of conglomerate informational advantage for their internal resource allocation decisions.

Keywords: Conglomerate information environment; Resource allocation efficiency; Inter-industry information transfer; Internal competition (search for similar items in EconPapers)
JEL-codes: D22 D24 D25 G31 M41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-022-01056-w

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