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Information systems, incentives and the timing of investments


  • Antle, Rick
  • Bogetoft, Peter
  • Stark, Andrew W.


The purpose of this paper is to study the effects of introducing information systems into a model featuring managerial incentive problems and investment opportunities that are mutually exclusive over time. In a principal-agent model in which a manager (agent) has superior information about investment costs, we introduce information systems, the signals from which are available to both the manager and the owner of the investment opportunity, which allow the owner to decrease the manager's informational advantage. We examine (i) the characteristics of the optimal information systems; (ii) the effects of such information systems on the owner's investment and compensation choices and on the value of the investment opportunity to the owner; (iii) the effects of such information systems on the timing of investment; (iv) the effects of such information systems on the overall probability of investment; and (v) when the owner might want to improve the information system at a particular point in time.
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Suggested Citation

  • Antle, Rick & Bogetoft, Peter & Stark, Andrew W., 2001. "Information systems, incentives and the timing of investments," Journal of Accounting and Public Policy, Elsevier, vol. 20(4-5), pages 267-294.
  • Handle: RePEc:eee:jappol:v:20:y:2001:i:4-5:p:267-294

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    References listed on IDEAS

    1. Rees, Ray, 1986. "Incentive compatible discount rates for public investment," Journal of Public Economics, Elsevier, vol. 30(2), pages 249-257, July.
    2. repec:bla:joares:v:33:y:1995:i::p:41-58 is not listed on IDEAS
    3. Antle, Rick & Bogetoft, Peter & Stark, Andrew W., 2001. "Incentive Problems and Investment Timing Options," Unit of Economics Working papers 24192, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    4. repec:bla:joares:v:36:y:1998:i::p:117-147 is not listed on IDEAS
    5. Bengt Holmstrom & Laurence Weiss, 1985. "Managerial Incentives, Investment and Aggregate Implications: Scale Effects," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 403-425.
    6. Rick Antle & Peter Bogetoft & Andrew W. Stark, 1997. "Selection among Mutually Exclusive Investments with Managerial Private Information and Moral Hazard," CIE Discussion Papers 1997-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    7. Rick Antle & Gary D. Eppen, 1985. "Capital Rationing and Organizational Slack in Capital Budgeting," Management Science, INFORMS, vol. 31(2), pages 163-174, February.
    8. Harris, Milton & Raviv, Artur, 1996. " The Capital Budgeting Process: Incentives and Information," Journal of Finance, American Finance Association, vol. 51(4), pages 1139-1174, September.
    9. repec:bla:joares:v:37:y:1999:i::p:187-214 is not listed on IDEAS
    10. Jonathan C. Glover & Anil Arya & Shyam NMI Sunder, 1999. "Earnings Management and the Revelation Principle," Yale School of Management Working Papers ysm120, Yale School of Management.
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    Cited by:

    1. Anil Arya & Jonathan Glover & Bryan R. Routledge, 2002. "Project Assignment Rights and Incentives for Eliciting Ideas," Management Science, INFORMS, vol. 48(7), pages 886-899, July.
    2. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9405-3 is not listed on IDEAS
    3. Boetoft, Peter, 2005. "An Information Economic Rationale for Cooperatives," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24476, European Association of Agricultural Economists.
    4. Mircea Epure, 2016. "Benchmarking for routines and organizational knowledge: a managerial accounting approach with performance feedback," Journal of Productivity Analysis, Springer, vol. 46(1), pages 87-107, August.
    5. David Martimort & Stéphane Straub, 2016. "How To Design Infrastructure Contracts In A Warming World: A Critical Appraisal Of Public–Private Partnerships," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 61-88, February.
    6. Anthon, Signe & Bogetoft, Peter & Thorsen, Bo Jellesmark, 2007. "Socially optimal procurement with tight budgets and rationing," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1625-1642, August.
    7. Löffler, Clemens & Pfeiffer, Thomas & Schneider, Georg, 2012. "Controlling for supplier switching in the presence of real options and asymmetric information," European Journal of Operational Research, Elsevier, vol. 223(3), pages 690-700.
    8. Clemens Löffler & Thomas Pfeiffer & Georg Schneider, 2013. "The irreversibility effect and agency conflicts," Theory and Decision, Springer, vol. 74(2), pages 219-239, February.
    9. Thomas Pfeiffer & Georg Schneider, 2007. "Residual Income-Based Compensation Plans for Controlling Investment Decisions Under Sequential Private Information," Management Science, INFORMS, vol. 53(3), pages 495-507, March.
    10. Brian Mittendorf, 2004. "Information Revelation, Incentives, and the Value of a Real Option," Management Science, INFORMS, vol. 50(12), pages 1638-1645, December.

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