File Download

There are no files associated with this item.

  Links for fulltext
     (May Require Subscription)
Supplementary

Article: Capital budgeting in multidivision firms: Information, agency, and incentives

TitleCapital budgeting in multidivision firms: Information, agency, and incentives
Authors
Issue Date2004
Citation
Review of Financial Studies, 2004, v. 17, n. 3, p. 739-767 How to Cite?
AbstractWe examine optimal capital allocation and managerial compensation in a firm with two investment projects (divisions) each run by a risk-neutral manager who can provide (i) (unverifiable) information about project quality and (ii) (unverifiable) access to value-enhancing, but privately costly resources. The optimal managerial compensation contract offers greater performance pay and a lower salary when managers report that their project is higher quality. The firm generally underinvests in capital and managers underutilize resources (relative to first-best). We also derive cross-sectional predictions about the sensitivity of investment in one division to the quality of investment opportunities in the other division, and the relative importance of division-level and firm-level performance-based pay in managerial compensation contracts.
Persistent Identifierhttp://hdl.handle.net/10722/241891
ISSN
2015 Impact Factor: 3.119
2015 SCImago Journal Rankings: 9.925

 

DC FieldValueLanguage
dc.contributor.authorBernardo, Antonio E.-
dc.contributor.authorCai, Hongbin-
dc.contributor.authorLuo, Jiang-
dc.date.accessioned2017-06-23T01:56:02Z-
dc.date.available2017-06-23T01:56:02Z-
dc.date.issued2004-
dc.identifier.citationReview of Financial Studies, 2004, v. 17, n. 3, p. 739-767-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/241891-
dc.description.abstractWe examine optimal capital allocation and managerial compensation in a firm with two investment projects (divisions) each run by a risk-neutral manager who can provide (i) (unverifiable) information about project quality and (ii) (unverifiable) access to value-enhancing, but privately costly resources. The optimal managerial compensation contract offers greater performance pay and a lower salary when managers report that their project is higher quality. The firm generally underinvests in capital and managers underutilize resources (relative to first-best). We also derive cross-sectional predictions about the sensitivity of investment in one division to the quality of investment opportunities in the other division, and the relative importance of division-level and firm-level performance-based pay in managerial compensation contracts.-
dc.languageeng-
dc.relation.ispartofReview of Financial Studies-
dc.titleCapital budgeting in multidivision firms: Information, agency, and incentives-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1093/rfs/hhg050-
dc.identifier.scopuseid_2-s2.0-4344574907-
dc.identifier.volume17-
dc.identifier.issue3-
dc.identifier.spage739-
dc.identifier.epage767-

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats