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| Author: | Harris, M. Raviv, A. |
| Title: | Allocation of decision-making authority |
| Journal: | Review of finance
2005 : VOL 9:3, p. 353-383 |
| Index terms: | Decision making Managers Investments Information Models |
| Language: | eng |
| Abstract: | This paper deals with the question of what determines where in a firm's hierarchy investment decisions (here as: inv-dec./inv-decs.) are made. Presented is a simple model of a CEO and a division manager (here as: div-mgr.) to analyze when the CEO will choose to allocate decision-making authority over an inv-dec. to a div-mgr. It is shown among others that the probability of delegation increases with the importance of the div-mgrs's information and decreases with the importance of the CEO's information. It is also shown that under certain conditions, the average investment will be smaller when the decision is delegated. |
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