The amount of value that can be created through an internal capital market is directly proportional to the efficiency of the external capital market. This is because an internal capital market strategy makes money as managers cannot make better investment decisions within the firm than the external capital market would, often because they don't have the superior information that the external capital market.

Question

Quizplus · Accepted Answer

The efficiency of internal capital markets is not directly proportional to the efficiency of external capital markets. Internal capital markets can create value even when external markets are efficient, as they allow for the allocation of capital within a firm based on proprietary information and strategic considerations that external investors may not have.

The Amount of Value That Can Be Created Through an Internal