Multinationals do it better: Evidence on the efficiency of corporations' capital budgeting

Greene, William H.; Hornstein, Abigail S.; White, Lawrence J.

doi:10.1016/j.jempfin.2009.07.004

Cited by 30 publications

(19 citation statements)

References 51 publications

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“…This study contributes to the economics and finance literature by looking into the firm and identifying the sources of heterogeneity in firms’ capital investment efficiency (Greene et al, 2009). Specifically, efficiency in capital investment not only depends on the external environment for information (Durnev et al, 2004), but also relates to internal coordination and information sharing.…”

Section: Discussionmentioning

confidence: 99%

“…The methodology to calculate marginal q was developed by Durnev et al (2004) and was extended by Greene et al (2009). The marginal q of firm i can be defined as: where V i , t is the market value of firm i at time t , and A i , t is the total assets of firm i at time t .…”

Section: Model and Empirical Methodologymentioning

confidence: 99%

“…Firms that face agency and informational asymmetry problems make less efficient capital budgeting decisions (Durnev et al, 2004; Greene et al, 2009) due to both intrafirm and interfirm conditions. Internally, to make value‐enhancing capital budgeting decisions, managers must possess sufficient information about the organization, and their interests must be aligned with those of the shareholders.…”

Section: Theoretical Analysismentioning

confidence: 99%

“…There are many reasons why firms may not invest at optimal levels. Firms with more agency and informational asymmetry problems, for example, make less efficient capital budgeting decisions (Durnev et al, 2004; Greene et al, 2009). Information asymmetry problems may be particularly acute for large multi‐unit organizations, which are often geographically dispersed and managed with relative autonomy.…”

Section: Introductionmentioning

confidence: 99%

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Corporate Capital Budgeting Decisions and Information Sharing

Hornstein

Zhao

2011

Journal of Economics &Amp; Management Strategy

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Firms must overcome agency and information asymmetry problems to make efficient capital budgeting decisions; this is particularly true for firms with multiple units dispersed across geographic locations. Internal communication and coordination may therefore be crucial in reducing information asymmetry and achieving efficient resource allocation. We examine the relationship between capital budgeting decisions and the degree of internal information sharing using a dataset of 342 U.S. firms from 1993 to 2002. We observe a strong, significant relationship between value-enhancing capital budgeting decisions and stronger internal linkages. Specifically, the likelihood of excessive investments is significantly reduced with better information sharing across units.

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Section: Discussionmentioning

confidence: 99%

Section: Model and Empirical Methodologymentioning

confidence: 99%

Section: Theoretical Analysismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Corporate Capital Budgeting Decisions and Information Sharing

Hornstein

Zhao

2011

Journal of Economics &Amp; Management Strategy

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“…This is as follows: 27 . In this approach, the inverse of the variance of estimated parameters from stage one is used to weight observations in second stage GLS regressions (see Waring, 1996 andGreene et al, 2009 for relevant applications).…”

Section: Empirical Assessment Of the Determinants Of Causalitymentioning

confidence: 99%

Capital account reform and short- and long-run stock price leadership

Cai¹,

McGuinness

Qi³

2015

The European Journal of Finance

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Additional information:Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Capital account reform and short-and long-run stock price leadership AbstractThis paper studies the effect of capital account liberalization policies on the price discovery of crosslistings in Chinese stocks. We construct a non-linear causality framework that decomposes shortand long-run dimensions of price leadership. Our analysis shows that capital account liberalization has had a profound effect on long-run A-and H-price leadership traits. Specifically, increased inward capital movement from Qualified Foreign Institutional Investors (QFIIs) strengthens longterm leadership in the mainland A-market. Similarly, increased capital outflow from the Chinese mainland galvanizes long-term price discovery processes in the Hong Kong H-market. We thus offer strong evidence that capital account liberalization promotes stock market efficiency in the long-run. The present study's empirical account also suggests that such capital flows inhibit shortterm lead-lag effects.

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