A non-trivial share, though, is used to pay dividends and to purchase financial assets, or for mergers and acquisitions.3  2 / 17  BIS central bankers' speeches  It is well established in the literature that businesses prefer to finance investment using internal funds. Raising funds externally is more costly and can involve restrictions being imposed on the managers.
Internal funding is closely related to business investment. They are similar in size. This is evident in Graph 3, in which the dots comparing the level of internal funding (in a given year) with the level of business investment (the following year) are clustered around the 45 degree line.