The Dark Side of Internal Capital Markets : Divisional Rent - Seeking And Inefficient Investment  

Oleh:

Stein, Jeremy C. ; Scharfstein, David F.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 55 no. 6 (2000), page 2537-2564.
Topik: investment; models; executive compensation; financial management; organization theory; capital budgeting
Fulltext: p 2537.pdf (148.91KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88.3 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We decelop a two - tiered agency model that shows how rent - seeking behaviour on the part of division managers can subvert the workings of an internal capitla market. By rent - seeking, division managers can raise their bargaining power and extrace greater overall compensation from the CEO. And because the CEO is herself an agent of outside investors, this extra compensation may take the form not to cash wages, but rather of preferential capital budgeting allocations. One interesting feature of our model is that it implies a kind of "socialism" in internal capital allocation, whereby divisions get subsidized by stronger ones.

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