Internal capital markets and investment decisions

Purpose - This research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights and control as a factor explaining the effectiveness of investment management. The authors aim to apply the theory of the organizational architecture to the investment decision to understand its complexity and its efficiency. Design/methodology/approach - An empirical test was realized on a sample of 63 Tunisian firms using the methods of canonical correlation and cross tabulations. Findings - Even if organizational complexity has a linear and negative impact (opposite sign to what is expected) on the investment decision decentralization, which creates value, it appears that there is a positive association with the uncertainty of the environment, and a negative one with the scarcity and sharing of financial resources between units on the internal capital market. Originality/value - The authors show that the role played by the internal capital market in the value creating requires the setting of a centralized organizational structure.