Empire-Building or Bridge-Building? Evidence from New CEOs' Internal Capital Allocation Decisions

• 成果类型: Article
• 署名作者: Xuan, Yuhai
• 署名单位: Harvard University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhp030
• 发表日期: 2009
• 页码: 4919
• 关键词: DIVERSIFICATION DISCOUNT; inefficient investment; AGENCY COSTS; Firm value; cash flow; MARKETS; performance; succession; turnover; policies

摘要

This article investigates how the job histories of CEOs influence their capital allocation decisions when they preside over multidivisional firms. I find that, after CEO turnover, divisions not previously affiliated with the new CEO receive significantly more capital expenditures than divisions through which the new CEO has advanced. The pattern of reverse-favoritism in capital allocation is more pronounced if the new CEO has less authority or if the unaffiliated divisions have more bargaining power. I find evidence that having a specialist CEO negatively affects segment investment efficiency. The results suggest that new specialist CEOs use the capital budget as a bridge-building tool to elicit cooperation from powerful divisional managers in previously unaffiliated divisions.