A Theory of Socialistic Internal Capital Markets
We develop a model of a two-division firm in which the strongdivision has, on average, higher quality investment projects than the weakdivision. We show that the firm optimally biases its project selection policy in favor of the weak division and this bias is stronger when there is a greater spread in average project quality. The cost of such a policy is that the firm sometimes funds an inferior project but the benefit is that it motivates the manager of the strong division to set (and meet) more aggressive cash flow targets.
Antonio E. Bernardo Jiang Luo James J.D. Wang
School of Management, Los Angeles, CA 90095-1481, USA Department of Finance, HKUST, Clear Water Bay, Hong Kong Department of Economics and Finance, City University of Hong Kong, Kowloon, Hong Kong
国际会议
西安
英文
1-39
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）