JOURNAL ARTICLE

Commentary on "The Economics of Capital Allocation in Firms: Evidence from Internal Capital Markets".

  • Published In: Management Science (INFORMS), 2025, v. 71, n. 11. P. 9868 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Poux-Guillaume, Grégoire 3 of 3

Abstract

This article focuses on the complexities of capital allocation within firms, highlighting findings from a chief financial officer (CFO) survey analyzed in "The Economics of Capital Allocation in Firms: Evidence from Internal Capital Markets." It reveals that capital allocation is often less analytical and more influenced by bottom-up and top-down dynamics, including information asymmetry and corporate interventions that can distort investment decisions. The study discusses challenges such as balancing diversification benefits with investor preferences for focus, and the limitations of layered control processes like postinvestment audits amid short managerial tenures. Overall, the analysis provides insights into the organizational, analytical, and behavioral factors shaping capital allocation and suggests pathways for improving alignment and efficiency in corporate investment decisions.

Additional Information

  • Source:Management Science (INFORMS). 2025/11, Vol. 71, Issue 11, p9868
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2025
  • ISSN:0025-1909
  • DOI:10.1287/mnsc.2025.01932
  • Accession Number:189064417
  • Copyright Statement:Copyright of Management Science (INFORMS) is the property of INFORMS: Institute for Operations Research & the Management Sciences and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

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