Internal capital market efficiency of Belgian holding companies

In this paper, we raise the following two questions: (1) do Belgian holding companies operate an internal capital market to transfer financial resources in between their subsidiaries? And if yes, (2) is the internal capital market efficient? To answer the first question, we check if the group cash flow is a determinant of the investment's spending of group members. The answer is positive if the holding's subsidiary is affiliated to a coordinate center and negative otherwise. To answer the second question, we evaluate if internal transfers are driven by efficiency. From our estimations, we cannot conclude that Belgian Holding companies have an efficient internal capital market.