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Capital Budgeting and Delegation, Journal of Financial Economics

Abstract

As part of our ongoing research into capital budgeting processes as responses to decentralized information and incentive problems, we focus in this paper on when a level of a managerial hierarchy will delegate the allocation of capital across projects and time to the level below it. In our model, delegation is a way to save on costly investigation of proposed projects. Therefore, it is more extensive the larger are the costs of such investigations. This delegation takes advantage of the fact that the lower-level manager's preferences are assumed to be similar (though not identical) to those of the higher level.

Type

Article

Author(s)

Milton Harris, Artur Raviv

Date Published

1998

Citations

Harris, Milton, and Artur Raviv. 1998. Capital Budgeting and Delegation. Journal of Financial Economics. 50(3): 259-289.

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