The dark side of internal capital markets: Divisional rent-seeking and inefficient investment

• 成果类型: Article
• 署名作者: Scharfstein, DS; Stein, JC
• 署名单位: Massachusetts Institute of Technology (MIT); Harvard University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00299
• 发表日期: 2000
• 页码: 2537-2564
• 关键词: INFLUENCE COSTS; cash flow; corporate; diversification; OWNERSHIP; MODEL

摘要

We develop a two-tiered agency model that shows how rent-seeking behavior on the part of division managers can subvert the workings of an internal capital market. By rent-seeking, division managers can raise their bargaining power and extract greater overall compensation from the CEO. And because the CEO is herself an agent of outside investors, this extra compensation may take the form not of cash wages, but rather of preferential capital budgeting allocations. One interesting feature of our model is that it implies a kind of socialism in internal capital allocation, whereby weaker divisions get subsidized by stronger ones.