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Article: CVP under uncertainty and the manager's utility function revisited

TitleCVP under uncertainty and the manager's utility function revisited
Authors
KeywordsConflict of interest
Cost-volume-profit analysis
Multiple sources of uncertainty
Risk aversion
Issue Date1999
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0924-865X
Citation
Review Of Quantitative Finance And Accounting, 1999, v. 12 n. 2, p. 159-171 How to Cite?
AbstractThis paper re-examines the model of Kim, Abdolmohammada, and Klein (KAK, 1996) in which owners of a firm delegate the production decision to a risk-averse manager. Conflict of interest between the owners and the manager emerges as the latter maximizes the expected utility of his/her own wealth rather than that of the firm's profits. This paper shows that the results of KAK on the expected contribution margin and the excess return on the risky asset are flawed. Furthermore, while KAK study the effects of delegating the production decision to the manager on the firm's optimal output based on the mean-variance analysis, this paper derives parallel results within utility functions exhibiting constant absolute risk aversion and any arbitrary probability distribution functions. © 1999 Kluwer Academic Publishers.
Persistent Identifierhttp://hdl.handle.net/10722/85666
ISSN
2015 SCImago Journal Rankings: 0.452
References

 

DC FieldValueLanguage
dc.contributor.authorChan, DKen_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:07:47Z-
dc.date.available2010-09-06T09:07:47Z-
dc.date.issued1999en_HK
dc.identifier.citationReview Of Quantitative Finance And Accounting, 1999, v. 12 n. 2, p. 159-171en_HK
dc.identifier.issn0924-865Xen_HK
dc.identifier.urihttp://hdl.handle.net/10722/85666-
dc.description.abstractThis paper re-examines the model of Kim, Abdolmohammada, and Klein (KAK, 1996) in which owners of a firm delegate the production decision to a risk-averse manager. Conflict of interest between the owners and the manager emerges as the latter maximizes the expected utility of his/her own wealth rather than that of the firm's profits. This paper shows that the results of KAK on the expected contribution margin and the excess return on the risky asset are flawed. Furthermore, while KAK study the effects of delegating the production decision to the manager on the firm's optimal output based on the mean-variance analysis, this paper derives parallel results within utility functions exhibiting constant absolute risk aversion and any arbitrary probability distribution functions. © 1999 Kluwer Academic Publishers.en_HK
dc.languageengen_HK
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0924-865Xen_HK
dc.relation.ispartofReview of Quantitative Finance and Accountingen_HK
dc.subjectConflict of interesten_HK
dc.subjectCost-volume-profit analysisen_HK
dc.subjectMultiple sources of uncertaintyen_HK
dc.subjectRisk aversionen_HK
dc.titleCVP under uncertainty and the manager's utility function revisiteden_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0924-865X&volume=12&issue=2&spage=159&epage=170&date=1999&atitle=CVP+under+Uncertainty+and+the+Manager%27s+Utility+Function+Revisiteden_HK
dc.identifier.emailChan, DK: dkchan@hkucc.hku.hken_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityChan, DK=rp01046en_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1023/A:1008352305790-
dc.identifier.scopuseid_2-s2.0-0242558600en_HK
dc.identifier.hkuros41219en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0242558600&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume12en_HK
dc.identifier.issue2en_HK
dc.identifier.spage159en_HK
dc.identifier.epage171en_HK
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridChan, DK=7402216890en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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