Internal capital markets and predictability in complex ownership firms

Ran Chang, Angelica Gonzalez, Sergei Sarkissian*, Jun Tu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Using global cross-firm ownership data, we find that both stock returns and cash-flow news of ownership-linked firms predict focal firm’s returns for all types of ownership structures: subsidiary−parent, parent−subsidiary, subsidiary−subsidiary, and parent−parent. This effect, observed only after the establishment of cross-firm ownership, is not subsumed by focal firm or industry momentum, or alternative inter-firm relations, including customer−supplier links and shared analyst coverage. Our findings are explained by mispricing due to internal capital markets – a mechanism unique to complex ownership firms. Higher internal capital market activity among ownership-linked firms also induces larger investments and lower external financing of the focal firm.
Original languageEnglish
Article number102219
JournalJournal of Corporate Finance
Early online date19 May 2022
Publication statusPublished - Jun 2022


  • decision-making commonality
  • earnings surprises
  • investors’ inattention
  • limits to arbitrage
  • capital expenditures
  • debt financing
  • equity financing
  • market inefficiency
  • multinational enterprises


Dive into the research topics of 'Internal capital markets and predictability in complex ownership firms'. Together they form a unique fingerprint.

Cite this