Shareholder Value or Competitive Advantage? Evidence from Hurdle Rates
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.
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- 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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