Seminar – Financial Divisions in Diversified Firms

Dr Cláudia Custódio, Imperial College London

This paper studies non-financial conglomerates that have a dedicated financial division, which is hypothesized, improves the operation of internal capital markets. The study develops a simple model based on this idea, which predicts that financial divisions are more valuable for larger firms, for firms with more diverse segments, and also for firms with more segments. Consistent with these predictions, the study empirically finds that it is conglomerates with the aforementioned characteristics that tend to possess a dedicated financial division. Moreover, the research shows empirical evidence that supports the notion that conglomerates with financial divisions run more efficient internal capital markets. Finally, the study documents that conglomerates with a financial division appear to command a value premium when compared to otherwise similar firms.

Speaker bio

Cláudia Custódio has been an Associate Professor of Finance at Imperial College since 2016. She was awarded her PhD from the London School of Economics in 2010. After graduating Cláudia spent time in the US working within the Department of Finance at the W.P. Carey School of Business, Arizona State University before moving back to her native Lisbon to join NOVA School of Business and Economics in 2014. She is a research associate of the Centre for Economic Policy Research (CEPR), the European Corporate Governance Institute (ECGI), and the Financial Markets Group (FMG). Cláudia’s focus is corporate finance and her work has been published several times in academic journals such as the Journal of Finance, the Journal of Financial Economics and the Review of Financial Studies. She is also the author of a corporate finance textbook in Portuguese, “Finanças da Empresa”.