search query: @author Chaney, P. K. / total: 4
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| Author: | Chaney, P. K. |
| Title: | Moral Hazard and Capital Budgeting |
| Journal: | Journal of Financial Research
1989 : SUMMER, VOL. 12:2, p.113-128 |
| Index terms: | BUDGETING CAPITAL BUDGETING |
| Language: | eng |
| Abstract: | The paper examines the effect of moral hazard on capital budgeting. The author shows that moral hazard may change project rankings based on net present value under perfect information. It is demonstrated that in some agency relationships moral hazard increases managerial contracting costs more for projects with slower paybacks, thus producing a bias in favor of projects with faster paybacks. This effect appears only under specific conditions: e.g. if the uncertainty of the rival project is relatively high and /or the manager is sufficiently effort averse. |
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