Investigating the efficiency internal capital markets of business groups in allocating resources and performance; the effect of ownership-control wedge and product Market competition

Subject Areas : Investments

Faramarz  Karami Taleghani ¹ (Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.)
Mohammad Reza  Vatanparast ² (Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.)
Javad  Rezazadeh ³ (Department of Accounting, Tarbiat Modares University, Tehran, Iran.)
Keyhan  Azadi Hir ⁴ (Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.)

Received: 2023-04-05 Accepted : 2023-06-08 Published : 2023-06-22

Keywords: product market competition, Ownership-Control Wedge, Business Groups, Internal Capital Markets,

Abstract :

Purpose: The common feature of the theoretical approaches adopted to study business groups is the presence of internal capital markets in these groups. The accounting literature shows that the efficiency of these markets in allocating resources and performance can be affected by self-interested motives resulting from the agency problem. Therefore, the purpose of this research is to investigate the effect of the ownership-control wedge on the efficiency of internal capital markets of business groups in resource allocation and performance with regard to product market competition.Methodology: This descriptive-correlation research has been done from the perspective of practical purpose and using the post-event approach. . In order to achieve the goal of the research, the data of 18 business groups whose parent companies are listed in the Tehran Stock Exchange or OTC were collected during the years 2015 to 2022 and the study hypotheses were tested using multiple regression with panel data.Findings: the findings of the study show that the ownership-control wedge has a negative and significant effect on the efficiency of resource allocation and the efficiency of the internal capital markets of business groups. Also, the findings only show that the relationship between the ownership-control wedge and the efficiency of the internal capital markets of business groups weakens with the increase in product market competition. However, there was no evidence of the effect of product market competition on the relationship between ownership-control wedge and resource allocation efficiency.Originality / Value: It is important to pay attention to the internal capital markets of business groups as a potential mechanism to facilitate the efficient allocation of resources and achieve strategic advantages. Therefore, by knowing more about the phenomenon of ownership-control gap and its effect on the efficiency of internal capital markets of business groups in the allocation of resources and performance, basic steps can be taken to achieve strategic benefits (such as the development of the domestic economy).

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