dissertationThis study examines the efficiency of resource reallocation within multisegment firms. A defining feature of multisegment firms is management's ability to transfer resources across divisions. Although the option to use the proceeds or cash flows from one division of the firm to finance operations in another division is valuable to a firm, a large stream of literature documents potentially value-destroying consequences when agency conflicts interfere with investment decisions. Research to date provides mixed results as to whether multisegment firms reallocate resources efficiently. The extent that managers' resource reallocation decisions reflect improvements in efficiency is relevant to firms' existing and potential stakeholders. The reallocation of resources within firms provides new information about factors that underlie firm value, such as growth opportunities and risk exposure. To assess the efficiency of firms' resource allocation decisions, I create two unique, composite measures of efficiency that combine the performance of each segment relative to a firm's other segments and the segment's industry lifecycle stage. I examine the association between these measures and changes in the assets allocated to each of the firm's segments. I also investigate the influence of corporate governance factors. When financing occurs in-house, the firm has greater incentives to monitor the use of funds. Therefore, the ability of a firm's corporate governance structure to alleviate agency problems should be related to the efficiency of management's resource allocation decisions. Additionally, the greater complexity inherent in operating in multiple segments increases demands on firms' governance systems, making the efficiency of resource reallocation and the influence of related governance mechanisms important empirical questions. Using segment data provided under SFAS No. 131, I find that firms reallocate resources to segments with the best comparative advantages within the firm, suggesting that multisegment firms, on average, reallocate resources efficiently. Additionally, I find that firms with more independent boards more quickly reallocate resources away from segments with lower within-firm comparative advantages than do firms with more affiliated or dependent boards
