Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283896 
Year of Publication: 
2024
Series/Report no.: 
KIT Working Paper Series in Economics No. 163
Publisher: 
Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON), Karlsruhe
Abstract: 
We examine how division managers' human capital affects internal capital allocation using a hand-collected data set of divisional managers at S&P 1,500 firms. Based on a novel measure of division-manager ability, we show that more able division managers receive substantially larger capital allocations. This effect is robust to controlling for the possibility of assortative matching and more pronounced for firms with better governance. We also find that the allocation of extra capital to higher-ability managers creates firm value. These findings suggest efficient fund transfers to high-productivity managers and provide support for a largely unexplored bright side of internal capital markets.
Subjects: 
Managerial Ability
Managerial Efficiency
Human Capital
Capital Budgeting
Investment
Internal Capital Markets
JEL: 
G31
G32
G34
J24
Document Type: 
Working Paper

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