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Shareholder Value or Competitive Advantage? Evidence from Hurdle Rates


  • Ciaran Driver

    (Imperial College)

  • Paul Temple

    (University of Surrey)


Economic 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.

Suggested Citation

  • Ciaran Driver & Paul Temple, 2004. "Shareholder Value or Competitive Advantage? Evidence from Hurdle Rates," School of Economics Discussion Papers 0104, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:0104

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    References listed on IDEAS

    1. 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.
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    Cited by:

    1. George Blazenko & Andrey Pavlov, 2010. "Value maximizing hurdle rates for R&D investment," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(8), pages 693-717.

    More about this item


    Hurdle rate; Investment; Strategy; Governance; PIMS database; Multinomial logit;

    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 - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity


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