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Capital Budgeting in a Multidivisional Firm

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  • Anil Arya
  • Jonathan Glover
  • Richard A. Young

Abstract

The purpose of this paper is to study capital budgeting in a setting where emphasis is on control over project selection. We construct a model of a multidivisional firm in which there are no constraints on investment and all projects have a positive net present value. Nevertheless, we show that it is optimal for the center to use relative project ranking in determining which projects are to be funded.

Suggested Citation

  • Anil Arya & Jonathan Glover & Richard A. Young, "undated". "Capital Budgeting in a Multidivisional Firm," Corporate Finance & Organizations _005, Ohio State University.
    • Handle: RePEc:wop:ohstfi:_005
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    File URL: http://www.cob.ohio-state.edu/dept/acctmis/fac/young/work/jaaf.doc
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    Cited by:

    1. Sprinkle, Geoffrey B., 2003. "Perspectives on experimental research in managerial accounting," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 287-318.
    2. Nicole Bastian Johnson & Thomas Pfeiffer & Georg Schneider, 2017. "Two-stage capital budgeting, capital charge rates, and resource constraints," Review of Accounting Studies, Springer, vol. 22(2), pages 933-963, June.
    3. Sainty, Barbara, 1999. "Achieving greater cooperation in a noisy prisoner's dilemma: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 421-435, July.
    4. Laux, Volker, 2008. "On the value of influence activities for capital budgeting," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 625-635, March.

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