Start of Main Content
Journal Article
The Capital Budgeting Process, Incentives, and Information
Journal of Finance
Author(s)
We study the capital allocation process within firms. Observed budgeting processes are explained as a response to decentralized information and incentive problems. It is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low. We also investigate how the budgeting process may be expected to vary with firm or division characteristics such as investment opportunities and the technology for information transfer.
Date Published:
1996
Citations:
Harris, Milton, Artur Raviv. 1996. The Capital Budgeting Process, Incentives, and Information. Journal of Finance. (4)1136-1174.