Project-Specific External Financing and Headquarters Monitoring Incentives
This article analyzes the relationship between a firm's financing and its project incorporation decisions. It is shown that headquarters may have an incentive to carry out a new project within a subsidiary rather than within the existing firm. The project is partially financed through an external claim which is taken on by the subsidiary even though the parent corporation has sufficient funds to finance the project on its own. The reason for this is that reducing headquarters' claim on the project's cash flow may increase its incentive to monitor the quality of the project prior to making a continuation investment. This has positive incentive implications for the manager who is running the project. Copyright 2001 by Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 17 (2001)
Issue (Month): 2 (October)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://jleo.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:17:y:2001:i:2:p:397-412. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.