Capital budgeting in multi-division firms: Information, agency, and incentives

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June 20, 2003
§

Jiang Luo

‡

Hongbin Cai

†

Antonio E. Bernardo

Information, agency, and incentives∗
Capital budgeting in multi-division firms:

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Introduction

The long-term health of a firm is determined by the quality of its investments. In a typical firm, capital is allocated to investment projects based on reports by division managers who have access to private information about project quality. The eventual success of any project may

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