Internal capital markets and investment decisions

Hamadi Fakhfakh (Professor in Finance, Faculty of Economic Sciences and Management of Sfax, University of Sfax, Sfax, Tunisia)
Ghazi Zouari (Assistant Professor in Finance, Faculty of Economic Sciences and Management of Sfax, University of Sfax, Sfax, Tunisia)
Rim Zouari‐Hadiji (Assistant Professor in Finance, Faculty of Economic Sciences and Management of Mahdia, University of Monastir, Mahdia, Tunisia)

Corporate Governance

ISSN: 1472-0701

Publication date: 6 April 2012

Abstract

Purpose

This research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights and control as a factor explaining the effectiveness of investment management. The authors aim to apply the theory of the organizational architecture to the investment decision to understand its complexity and its efficiency.

Design/methodology/approach

An empirical test was realized on a sample of 63 Tunisian firms using the methods of canonical correlation and cross tabulations.

Findings

Even if organizational complexity has a linear and negative impact (opposite sign to what is expected) on the investment decision decentralization, which creates value, it appears that there is a positive association with the uncertainty of the environment, and a negative one with the scarcity and sharing of financial resources between units on the internal capital market.

Originality/value

The authors show that the role played by the internal capital market in the value creating requires the setting of a centralized organizational structure.

Keywords

Citation

Fakhfakh, H., Zouari, G. and Zouari‐Hadiji, R. (2012), "Internal capital markets and investment decisions", Corporate Governance, Vol. 12 No. 2, pp. 179-198. https://doi.org/10.1108/14720701211214070

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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