Optimal Dynamic Capital Budgeting

• 成果类型: Article
• 署名作者: Malenko, Andrey
• 署名单位: Massachusetts Institute of Technology (MIT)
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdy043
• 发表日期: 2019
• 页码: 1747-1778
• 关键词: continuous-time; asymmetric information; optimal-contracts; security design; moral hazard; AGENCY; INVESTMENT; incentives; MARKETS

摘要

I study optimal design of a dynamic capital allocation process in an organization in which the division manager with empire-building preferences privately observes the arrival and properties of investment projects, and headquarters can audit projects at a cost. Under certain conditions, a budgeting mechanism with threshold separation of financing is optimal. Headquarters: (1) allocate a spending account to the manager and replenish it over time; (2) set a threshold, such that projects below it are financed from the account, while projects above are financed fully by headquarters upon an audit. Further analysis studies when co-financing of projects is optimal and how the size of the account depends on past performance of projects.