Incentivizing Irreversible Investment

• 成果类型: Article
• 署名作者: Livdan, Dmitry; Nezlobin, Alexander
• 署名单位: University of California System; University of California Berkeley; University of London; London School Economics & Political Science
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2017-0573
• 发表日期: 2022
• 页码: 349-371
• 关键词: managerial performance evaluation; intertemporal cost allocation; decisions; depreciation; uncertainty

摘要

Existing dynamic investment models that show that a manager can be incentivized to implement the optimal investment policy rely on the assumption that the firm is operating in an ever-expanding product market. This paper presents an analytically tractable, discrete-time, neoclassical model with irreversible investment and the possibility of unfavorable demand events. We show that even when the principal is uninformed about changes in demand for the firm's output, there exists a performance measurement system that leads to goal congruent investment incentives for the manager. If the principal can observe the unfavorable demand events, then goal congruence can be achieved using very simple accrual accounting rules, such as straight-line depreciation.