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| Author: | Kim, D. |
| Title: | Capital budgeting for new projects: On the role of auditing in information acquisition |
| Journal: | Journal of Accounting & Economics
2006 : SEP, VOL. 41:3, p. 257-270 |
| Index terms: | auditing information capital budgeting resource allocation projects |
| Language: | eng |
| Abstract: | This study deals with capital budgeting (hereafter as: c-b.) for new projects with information (here as: info.) acquired by managers. When info. acquisition (as: acq.) costs are small, optimal c-b. is not qualitatively different from that for routine projects with managers having pre-existing info. However, the need to provide incentives to acquire info. results in more intensive auditing and further distortions in capital allocations. When info. acq. costs are large, optimal capital budgeting differs from that for routine projects. To provide strong incentives for info. acq., auditing becomes more extensive. |
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