Moral hazard in corporate investment and the disciplinary role of voluntary capital rationing

• 成果类型: Article
• 署名作者: Zhang, GC
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.43.6.737
• 发表日期: 1997
• 页码: 737-750
• 关键词: capital rationing; Principal-agent; high hurdle rate; NPV; renegotiation-proof

摘要

This paper compares three capital-budgeting rules, the NPV rule, a high hurdle rate and capital rationing, and explains why some firms may voluntarily impose capital rationing. Under both capital rationing and a high hurdle, a restrictive investment criterion is used to control managerial shirking. However, implementation of these budgeting rules requires a mechanism to prevent the firm from expanding the investment scale ex post. Capital rationing, in the form of a predetermined, fixed budget, differs from the high-hurdle-rate rule in that the former requires the firm to overcome the cost of raising additional capital before making further investment.