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| Tekijä: | Zhang, G. |
| Otsikko: | Moral hazard in corporate investment and the disciplinary role of voluntary capital rationing |
| Lehti: | Management Science
1997 : JUN, VOL. 43:6, p. 737-750 |
| Asiasana: | CORPORATE FINANCE INVESTMENT MORAL HAZARD AGENCY THEORY |
| Kieli: | eng |
| Tiivistelmä: | This study compares three capital rules, the NPV rule, capital rationing, and a high hurdle rate, and explains why rationing may be practiced voluntarily by companies. The criterion for project funding has a direct effect on the incentives of project managers: the more restrictive the criterion is, the less potential there is to shrink for managers. Depending on the characteristics of potential projects, either the NPV rule, capital rationing or a high hurdle rate may produce the company profit. Since the latter two rules require the firm to be committed not to fund all profitable projects, the implementability of them needs to be examined in a renegotiation-permitting context. |
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