Research Details

Abstract

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.

Type

Article

Author(s)

Milton Harris, Artur Raviv

Date Published

1996

Citations

Harris, Milton, and Artur Raviv. 1996. The Capital Budgeting Process, Incentives, and Information. Journal of Finance.(4): 1136-1174.