AGENCY COST AND EFFICIENCY OF INTERNAL CAPITAL MARKETS

The aim of this article is to identify the risk of loosing efficiency of internal capital markets as the result of opportunistic behaviour represented by agents. An internal capital market institution exists in most transnational corporations. The few publications available in economic literature allow us to draw a conclusion that the role of these markets as the source of funds for financing investments is still growing. It is also crucial to know the factors which influence the efficiency of their operations, as they enable movements of substantial funds in a relatively short period of time, which, in turn, stimulates a dynamic growth of an organization in an international context. On the other hand, however, this creates the risk of opportunistic behaviour amongst those members o f the organization who may influence the quality of information transferred onto higher levels of corporations where key decisions are made. The wish to control the largest possible number of corporate resources as well as the realization of individual goals at owners' cost lead to an inefficient usage of financial resources and implementation of investment projects which do not guarantee the highest return ratios. Treating the agency cost theory as a research platform will allow to analyse this issue in the light of decision makers' motivations, and to draw a conclusion that alongside the opportunities which these markets open, they also create many threats which have their roots in human nature