Delegated Information Acquisition and Capital Budgeting: On the Separation of Project Evaluation and Project Management
AbstractThe paper analyzes the question who should be provided with incentives to acquire and reveal information about the quality of an investment proposal: the division manager, who derives private benefits of control from the project and always wants to invest, or the capital budgeting department, which has no personal interests in the decision. Interestingly, private benefits of control may reduce expected wage costs. In this case joint project evaluation and project management is optimal.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 157 (2001)
Issue (Month): 4 (December)
Contact details of provider:
Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ewerhart, Christian & Schmitz, Patrick W., 2000.
""Yes men", integrity, and the optimal design of incentive contracts,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 43(1), pages 115-125, September.
- Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes Men," Integrity, and the Optimal Design of Incentive Contracts," MPRA Paper 12534, University Library of Munich, Germany.
- Gromb, Denis & Martimort, David, 2004.
"The Organization of Delegated Expertise,"
IDEI Working Papers
284, Institut d'Économie Industrielle (IDEI), Toulouse.
- Kim, Doyoung, 2006. "Capital budgeting for new projects: On the role of auditing in information acquisition," Journal of Accounting and Economics, Elsevier, vol. 41(3), pages 257-270, September.
- Gromb, Denis & Martimort, David, 2007.
"Collusion and the organization of delegated expertise,"
Journal of Economic Theory,
Elsevier, vol. 137(1), pages 271-299, November.
- Gromb, Denis & Martimort, David, 2007. "Collusion and the Organization of Delegated Expertise," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
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