CREAT: Census Research Exploration and Analysis Tool

The Efficiency of Internal Capital Markets: Evidence from the Annual Capital Expenditure Survey

April 2008

Working Paper Number:

CES-08-08

Abstract

We empirically examine whether greater firm diversity results in the inefficient allocation of capital. Using both COMPUSTAT and the Annual Capital Expenditure Survey (ACES) we find firm diversity to be negatively related to the efficiency of investment. However once we distinguish between capital expenditure for structures and equipment, we find that while firms do inefficiently allocate capital for equipment, they efficiently allocate capital for structures. These results suggest that when the decision will have long-lasting repercussions, headquarters will, more often than not, make the correct choice.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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:
investment, market, company, corporate, investing, finance, investor, efficiency, diversification, consolidated, specialization, diversified, expenditure, capital, spending, invest, asset

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:
Standard Industrial Classification, Ordinary Least Squares, Bureau of Economic Analysis, COMPUSTAT, Federal Reserve Bank of Chicago, North American Industry Classification System

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