We examine the effect of competition for scarce corporate financial resources on managers' incentives to generate profitable investment opportunities. Operating an active internal capital market is unambiguously beneficial only if divisions have the same level of financial resources and the same...

The present paper analyzes the effect of competition for scarce corporate financial resources on managers' incentives to generate profitable investment opportunities. Competition is only unambiguously beneficial if projects are symmetric. If they are asymmetric, competition for corporate...

The paper provides novel insights on the effect of a firm’s risk management objective on the optimal design of risk transfer instruments. I analyze the interrelation between the structure of the optimal insurance contract and the firm's objective to minimize the required equity it has to hold...