2009 Fiscal Year Final Research Report

An Empirical Analysis on the Efficiency of Internal Capital Markets among Japanese Firms

Research Project

Project/Area Number	20830071
Research Category	Grant-in-Aid for Young Scientists (Start-up)
Allocation Type	Single-year Grants
Research Field	Business administration
Research Institution	Nagoya City University
Principal Investigator	SASAKI Takafumi Nagoya City University, 大学院・経済学研究科, 准教授 (10453078)
Project Period (FY)	2008 – 2009
Keywords	内部資本市場 / エージェンシー問題 / コーポレート・ガバナンス / 経営者報酬
Research Abstract	This research project investigates the relationship between corporate governance system and internal capital markets efficiency, focusing on the role of debt. Our regression results on Japanese firms indicate that higher levels of debt are associated with a decrease in the efficiency of the internal capital markets. This result implies that the beneficial effect of debt on the choice of investment level might be canceled out by this harmful effect for diversified firms. Our research also shows that managerial compensation associated with efficient governance system has a positive correlation with ex post firm performance.