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| Author: | Hinss, S. Kunz, A.H. Pfeiffer, T. |
| Title: | Information management with specific investments and cost-based transfer prices |
| Journal: | European Accounting Review
2005 : VOL. 14:4, p. 815-838 |
| Index terms: | Business information Decision making Divisionalised companies Investments Transfer pricing |
| Language: | eng |
| Abstract: | This article discusses information flows in a profit-centre organisation with internal trade between two risk-neutral divisions. The divisions make unverifiable investments in intrafirm synergies before the production. An analytical framework is presented to identify cost and revenue structures for which pre-decision information either supports or destroys intrafirm synergies by motivating or discouraging divisional investments. It is found that pre-decision information can undermine the incentives of risk-neutral agents to invest specifically. |
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