A theory of socialistic internal capital markets

• 成果类型: Article
• 署名作者: Bernardo, AE; Luo, J; Wang, JJD
• 署名单位: University of California System; University of California Los Angeles; Hong Kong University of Science & Technology; City University of Hong Kong
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2005.07.002
• 发表日期: 2006
• 页码: 485-509
• 关键词: internal capital markets; Capital budgeting; investment policy

摘要

We develop a model of a two-division firm in which the strong division has, on average, higher quality investment opportunities than the weak division. We show that, in the presence of agency and information problems, optimal effort incentives are less powerful and thus managerial effort is lower in the strong division. This leads the firm to bias its project selection policy against the strong division. The selection bias is more severe when there is a larger spread in the average quality of investment opportunities between the two divisions. (c) 2005 Elsevier B.V. All rights reserved.