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- Scopus: eid_2-s2.0-0031153784
- WOS: WOS:A1997XG07700001
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Article: Moral hazard in corporate investment and the disciplinary role of voluntary capital rationing
Title | Moral hazard in corporate investment and the disciplinary role of voluntary capital rationing |
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Authors | |
Keywords | NPV Renegotiation-Proof Principal-Agent Capital Rationing High Hurdle Rate |
Issue Date | 1997 |
Citation | Management Science, 1997, v. 43, n. 6, p. 737-750 How to Cite? |
Abstract | This paper compares three capital-budgeting rules, the NPV rule, a high hurdle rate and capital rationing, and explains why some firms may voluntarily impose capital rationing. Under both capital rationing and a high hurdle, a restrictive investment criterion is used to control managerial shirking. However, implementation of these budgeting rules requires a mechanism to prevent the firm from expanding the investment scale ex post. Capital rationing, in the form of a predetermined, fixed budget, differs from the high-hurdle-rate rule in that the former requires the firm to overcome the cost of raising additional capital before making further investment. |
Persistent Identifier | http://hdl.handle.net/10722/233755 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Zhang, Guochang | - |
dc.date.accessioned | 2016-09-27T07:21:33Z | - |
dc.date.available | 2016-09-27T07:21:33Z | - |
dc.date.issued | 1997 | - |
dc.identifier.citation | Management Science, 1997, v. 43, n. 6, p. 737-750 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/233755 | - |
dc.description.abstract | This paper compares three capital-budgeting rules, the NPV rule, a high hurdle rate and capital rationing, and explains why some firms may voluntarily impose capital rationing. Under both capital rationing and a high hurdle, a restrictive investment criterion is used to control managerial shirking. However, implementation of these budgeting rules requires a mechanism to prevent the firm from expanding the investment scale ex post. Capital rationing, in the form of a predetermined, fixed budget, differs from the high-hurdle-rate rule in that the former requires the firm to overcome the cost of raising additional capital before making further investment. | - |
dc.language | eng | - |
dc.relation.ispartof | Management Science | - |
dc.subject | NPV | - |
dc.subject | Renegotiation-Proof | - |
dc.subject | Principal-Agent | - |
dc.subject | Capital Rationing | - |
dc.subject | High Hurdle Rate | - |
dc.title | Moral hazard in corporate investment and the disciplinary role of voluntary capital rationing | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.scopus | eid_2-s2.0-0031153784 | - |
dc.identifier.volume | 43 | - |
dc.identifier.issue | 6 | - |
dc.identifier.spage | 737 | - |
dc.identifier.epage | 750 | - |
dc.identifier.isi | WOS:A1997XG07700001 | - |
dc.identifier.issnl | 0025-1909 | - |