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Internal Capital Markets in Dutch Firms

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Bruinshoofd, A., Diederen, B., Letterie, W. Internal Capital Markets in Dutch Firms. Credit and Capital Markets – Kredit und Kapital, 35(3), 437-459. https://doi.org/10.3790/ccm.35.3.437
Bruinshoofd, Allard; Diederen, Bert and Letterie, Wilko "Internal Capital Markets in Dutch Firms" Credit and Capital Markets – Kredit und Kapital 35.3, 2002, 437-459. https://doi.org/10.3790/ccm.35.3.437
Bruinshoofd, Allard/Diederen, Bert/Letterie, Wilko (2002): Internal Capital Markets in Dutch Firms, in: Credit and Capital Markets – Kredit und Kapital, vol. 35, iss. 3, 437-459, [online] https://doi.org/10.3790/ccm.35.3.437

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Internal Capital Markets in Dutch Firms

Bruinshoofd, Allard | Diederen, Bert | Letterie, Wilko

Credit and Capital Markets – Kredit und Kapital, Vol. 35 (2002), Iss. 3 : pp. 437–459

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Article Details

Author Details

Allard Bruinshoofd, Maastricht

Bert Diederen, Heerlen

Wilko Letterie, Maastricht

References

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Abstract

Using Dutch segment-level data for the 1995-1998 period, we investigate the presence of internal capital markets. Our findings are as follows. First, we find little evidence of internal capital markets in diversified firms. Second, the investment of a segment of a firm that houses a financial holding or a segment related to financial institutions exhibits significant sensitivity to the cash flows of the firm’s other segments, but is insignificantly related to its own cash flow. This finding does suggest the presence of an internal capital market. Third and last, segments of heavily indebted firms display a significant sensitivity of investment to their own cash flows only and the investment of segments of lightly indebted firms is solely related to the segments’ investment opportunities. (JEL G20, G31, G32, L20)