Divisional Managers and Internal Capital Markets

• 成果类型: Article
• 署名作者: Duchin, Ran; Sosyura, Denis
• 署名单位: University of Washington; University of Washington Seattle; University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12003
• 发表日期: 2013
• 页码: 387-429
• 关键词: corporate diversification; asymmetric information; Board connections; Agency problems; dark side; INVESTMENT; incentives; allocation; governance; BUSINESS

摘要

Using hand-collected data on divisional managers at S&P 500 firms, we study their role in internal capital budgeting. Divisional managers with social connections to the CEO receive more capital. Connections to the CEO outweigh measures of managers' formal influence, such as seniority and board membership, and affect both managerial appointments and capital allocations. The effect of connections on investment efficiency depends on the tradeoff between agency and information asymmetry. Under weak governance, connections reduce investment efficiency and firm value via favoritism. Under high information asymmetry, connections increase investment efficiency and firm value via information transfer.