capital;l budgeting

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The Society for Financial Studies

Decision Processes, Agency Problems, and Information: An Economic Analysis of Capital
Budgeting Procedures
Author(s): Anthony M. Marino and John G. Matsusaka
Source: The Review of Financial Studies, Vol. 18, No. 1 (Spring, 2005), pp. 301-325
Published by: Oxford University Press. Sponsor: The Society for Financial Studies.
Stable URL: http://www.jstor.org/stable/3598074 .
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DecisionProcesses,AgencyProblems,and
An
Information: EconomicAnalysisof Capital
BudgetingProcedures
Anthony M. Marino
John G. Matsusaka
University of Southern California use Corporations a varietyof processesto allocatecapital.This articlestudiesthe from the perspective a of benefitsand costs of severalcommonbudgetprocedures that delegateaspectsof the
Processes
modelwith agencyand information problems. in whileprocesses decisionto the agentresultin too manyprojects beingapproved, causethe agentto strategically retainsthe rightto rejectprojects whichthe principal aboutprojectquality.We show how the choiceof a decision distorthis information process depends on these two costs, and

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