Wayne State finance professor's research accepted by top publication

Mike Ilitch School of Business Finance Professor Ranjan D’Mello has had an article accepted by the academic journal Review of Accounting Studies, one of the top research publication in the accounting field.

The article, co-authored with two former finance doctoral students, Yonghong Jia and Xinghua Gao, is titled “Internal Control and Internal Capital Allocation: Evidence from Internal Capital Market of Multi-segment Firms.”

It studies how internal control is impacted over financial reporting, and how internal capital markets with company-level internal control weaknesses have a more pronounced impact.

A full abstract can be found below.

Ranjan D’Mello is an associate professor of finance at the Mike Ilitch School of Business at Wayne State University. His research interests include corporate finance, agency theory and payout policy. He has been published in several other academic journals, including Journal of Corporate Finance and Banking and Finance Review.


We investigate the impact of internal control over financial reporting on management decisions in directing corporate resources to alternative investment projects in multi-segment firms. Results from cross-sectional and inter-temporal analyses indicate that internal control weaknesses (ICWs) are associated with distortionary internal capital allocations. The adverse impact on internal capital markets is more pronounced for firms with company-level ICWs. Our analyses also show that firms with weak existing governance mechanisms benefit more from maintaining effective internal control. We further document that the negative impact of ICWs on firms’ internal capital transfers manifests in a lower excess value of diversification.

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