On the value of influence activities for capital budgeting

  • This paper shows that a capital budgeting process in which the division manager is required to engage in personally costly influence activities prior to a project approval has beneficial incentive effects: It provides the manager with incentives to acquire costly information about project prospects and helps to elicit the revelation of the acquired information. As a consequence, imposing influence costs on the manager can lead to improved capital allocations. The optimal level of influence costs, chosen by the firm, trades off ex ante incentives for information acquisition against efficient use of the acquired information ex post.

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Author:Volker LauxGND
Document Type:Report
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/09/23
Tag:Capital Butgeting; Influence Activities; Information Acquisition; Principal-Agent
GND Keyword:Kapitalbedarfsrechnung; Investitionsrechnung; Investitionsplanung; Lobbyismus; Kapitalallokation
Issue:Version October 2005
Page Number:23
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht