The Theory and Practice of Capital Allocation

Bohan Wang ()
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Bohan Wang: Shandong University, School of Business

A chapter in Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), 2022, pp 648-654 from Springer

Abstract: Abstract Internal capital allocation is one of the core propositions in the business process of multi-divisional conglomerates and is an essential factor affecting the survival and growth of firms. However, the internal capital allocation decision is intrinsically complex, and the existing research literature has multiple theoretical orientations, there are also large gaps in empirical findings and varying measures of allocation efficiency. This paper firstly summarizes the theoretical basis of internal capital allocation decisions and discusses the commonalities and differences between the theories. Secondly, it sorts out the factors affecting internal capital allocation decisions and discusses the reasons for the lack of consistency in the empirical results. Finally, it discusses the future research directions based on the selection of allocation efficiency measurement methods and moderating variables.

Keywords: internal capital allocation; internal capital market; capital allocation efficiency (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-036-7_97

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DOI: 10.2991/978-94-6463-036-7_97

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