Journals Information
Universal Journal of Management Vol. 6(9), pp. 318 - 339
DOI: 10.13189/ujm.2018.060903
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Diversification, Internal Capital Market, and Information Advantage
Chung-Hua Shih , Ching-Chih Wu *, Tung-Hsiao Yang
Department of Finance, National Chung Hsing University, Taichung City, Taiwan
ABSTRACT
We analyze the information advantage of insiders and institutional investors from the efficiency of internal capital market defined in Billett and Mauer [1]. The empirical evidence shows three major findings in this paper. First, the inefficient subsidies to constrained firms have significantly negative impact on the firm鈥檚 long-term performance. In addition, the diversified firms with transfer segments, both efficient and inefficient transfer, have significantly positive effect on the firm鈥檚 performance. Second, the insiders and institutional investors of diversified firms may use similar information regarding the internal capital market because they show the similar trading behavior with respect to efficient subsidies to both constrained and non-constrained segments. Finally, the insiders play a more important role in the firms鈥� long-term performance. In sum, we conclude that both institutional investors and insiders have some information advantage of internal capital market. Insiders, however, have stronger impact on the diversified firms鈥� long-term performance.
KEYWORDS
Diversification, Information Advantage, Internal Capital Market
Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Chung-Hua Shih , Ching-Chih Wu , Tung-Hsiao Yang , "Diversification, Internal Capital Market, and Information Advantage," Universal Journal of Management, Vol. 6, No. 9, pp. 318 - 339, 2018. DOI: 10.13189/ujm.2018.060903.
(b). APA Format:
Chung-Hua Shih , Ching-Chih Wu , Tung-Hsiao Yang (2018). Diversification, Internal Capital Market, and Information Advantage. Universal Journal of Management, 6(9), 318 - 339. DOI: 10.13189/ujm.2018.060903.