1、 2023 Boston Consulting Group1Capital allocation may be the most critical means of translating corporate strategy into action.It hasrecently gained even more attention by corporate boards as most companies face substantialinvestments and reallocation of capital for their digital and sustainability t

2、ransformations.Yet,surprisingly,an analysis of BCGs capital allocation database,which includes over 10,000 listed firms,found that capex levels relative to revenues have fallen by 10%in the last ten years.Over the sameperiod,payouts to shareholders(dividends and share buybacks)as well as cash levels

3、 relative torevenue have risen by over one third.It seems that company leaders are becoming more reluctant toThe Art of Capital AllocationCFO Excellence SeriesNOVEMBER 02,2023 By Sebastian Stange,Ulrich Pidun,Alexander Roos,and Martin LinkREADING TIME:12 MIN 2023 Boston Consulting Group2actually rei

4、nvest cash flow in light of increasing uncertainty,macro-economic volatility,and growinginterest rates.They risk conflicts with investors who grow impatient and want firms to invest in value-creating growth,as repeatedly confirmed in BCGs investors surveys.The reason for this reluctance is not a lac

5、k of opportunity.Successful companies are making smartinvestments.For example,our analysis of historical capital allocation performance has demonstratedthat outperformerscompanies in the top-third of stock market valuation relative to their peersinvested approximately 50%more in capex than their pee

6、rs and achieved approximately 55%higherreturns on assets and approximately 65%higher sales growth.(See Exhibit 1.)So how can management ensure better capital allocation performance?Our research and caseexperience reveal a number of best practices that top-performing companies consistently follow.The