Shareholder Value or Competitive Advantage? Evidence from Hurdle Rates
AbstractEconomic theory suggests several plausible reasons why firms may employ hurdle rates for capital investment appraisal that differ from discount rates. Using a sample of business units from the PIMS data bank of North American companies we find that hurdle rates are frequently below and also frequently above matched data on discount rates. Using multinomial logit analysis we find that variables representing the opportunity for strategic investment or the motivation for such investment increase the probability of managerial or strategic behaviour. We also find evidence for an irreversibility effect.
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Bibliographic InfoPaper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0104.
Length: 26 pages
Date of creation: Jan 2004
Date of revision:
Hurdle rate; Investment; Strategy; Governance; PIMS database; Multinomial logit;
Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- L6 - Industrial Organization - - Industry Studies: Manufacturing
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
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.:
- Robert Chirinko & Ulf von Kalckreuth, 2003.
"Further Evidence on the Relationship between Firm Investment and Financial Status,"
0302, Department of Economics, Emory University (Atlanta).
- von Kalckreuth, Ulf & Chirinko, Robert S., 2002. "Further Evidence On The Relationship Between Firm Investment And Financial Status," Discussion Paper Series 1: Economic Studies 2002,28, Deutsche Bundesbank, Research Centre.
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