Corporate-level influences on internal capital allocation: The role of financial analyst performance projections

John R. Busenbark, Matthew Semadeni, Mathias Arrfelt, Michael C. Withers

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


Research contends that internal capital should be allocated in proportion to divisional performance, but scholars are often puzzled to find that managers do not adhere to this winner-picking approach. We argue this is because scholarship has not incorporated corporate-level factors that influence how corporate managers structure holistic capital allocation strategies. In this study, we build on the behavioral theory of the firm to focus on analyst performance projections for multidivisional corporations and how they inform corporate managers' allocation strategies. Specifically, we theorize corporate managers deviate from the winner-picking allocation approach owing to search-related behaviors stemming from projected performance below or above expectations. We further theorize about conditions that offer corporate managers opportunities to deviate from winner-picking, focusing particularly on multidivisional relatedness and asset durability.

Original languageEnglish (US)
Pages (from-to)180-209
Number of pages30
JournalStrategic Management Journal
Issue number1
StatePublished - Jan 2022


  • asset durability
  • behavioral theory of the firm
  • capital allocation
  • divisional synergies
  • financial analysts

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management


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