Internal capital markets, divisional rent-seeking and optimal incentives: theory and evidence

Resource allocation within multidivisional corporations has been the subject of extensive research in economics, finance and management. Two related issues are the operation of internal capital markets within the multidivisional corporation and the incentives provided to division managers when there is a possibility of divisional rent-seeking. This project will study optimal incentives for division managers and the CEO in the face of divisional rent-seeking, clarify how the benefits of internal capital markets can be complemented by such optimal incentives, and empirically test our main theoretical findings.