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digit analysis can be used to detect allocations affected by managerial interventions. We are unaware of any study applying the Benford test to internal capital markets, while this approach appears very useful in this context. It is commonly used in the auditing, financial accounting, and fraud detection literature. JEL classification: C16, G21, G31. Keywords: Internal capital allocation; the Benford law; managerial engagement. 1. INTRODUCTION The allocation of scarce resources to the subunits and divisions represents a cru- cial process in conglomerate firms. The

Abstract

Allocating risk properly to subunits is crucial for performance evaluation and internal capital allocation of portfolios held by banks, insurance companies, investment funds and other entities subject to financial risk. We show that by using coherent measures of risk it is impossible to allocate risk satisfying simultaneously the natural game theoretical requirements of Core Compatibility and Strong Monotonicity. To obtain the result we characterize the Shapley value on the class of totally balanced games and also on the class of exact games as being the only risk allocation method satisfying Strong Monotonicity, Equal Treatment Property and Efficiency. Moreover, we clarify and interpret the related game theoretical requirements that have appeared in the literature so far and have been applied to risk allocation.

.Z. 2017 Board structure and corporate risk taking in the UK financial sector International Review of Financial Analysis 50 101 110 Aktas, N., Andreou, P.C., Karasamani, I., Philip, D. (2019), CEO duality, agency costs, and internal capital allocation efficiency, British Journal of Management , Vol. 30, No. 2, pp. 473–493. Aktas N. Andreou P.C. Karasamani I. Philip D. 2019 CEO duality, agency costs, and internal capital allocation efficiency British Journal of Management 30 2 473 493 Alfaro, L., Asis, G., Chari, A., Panizza, U. (2019), Corporate debt, firm size and