Information Systems, Incentives and the Timing of Investment
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.
|Date of creation:||2000|
|Contact details of provider:|| Web page: http://www.foi.life.ku.dk/|
More information through EDIRC
References listed on IDEAS
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.:
- 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.
- Rick Antle & Gary D. Eppen, 1985. "Capital Rationing and Organizational Slack in Capital Budgeting," Management Science, INFORMS, vol. 31(2), pages 163-174, February.
- 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.
- 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.
- 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.
- 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.
- Rees, Ray, 1986. "Incentive compatible discount rates for public investment," Journal of Public Economics, Elsevier, vol. 30(2), pages 249-257, July.
When requesting a correction, please mention this item's handle: RePEc:ags:rvaewp:24201. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.