search query: @indexterm Capital budgeting / total: 390
reference: 10 / 390
| Author: | Baldenius, T. |
| Title: | Delegated investment decisions and private benefits of control |
| Journal: | Accounting Review
2003 : OCT, VOL. 78:4, p. 909-930 |
| Index terms: | Capital budgeting Investment Residual income |
| Language: | eng |
| Abstract: | The capital budgeting process in studied in a setting where a manager is privately informed about the profitability of an investment project and enjoys nonpecuniary benefits of control ("empire benefits"). The optimal required rate of return is characterized and it is shown that a delegation scheme with residual income-based compensation can replicate the benchmark performance achieved under centralization. The results indicate that the optimal capital charge rate for computing residual income always exceeds the required rate of return as a result of empire benefits. |
SCIMA