Arbeitspapier
Innovation, endogenous overinvestment, and incentive pay
We analyze how two key managerial tasks interact: that of growing the business through creating new investment opportunities and that of providing accurate information about these opportunities in the corporate budgeting process. We show how this interaction endogenously biases managers toward overinvesting in their own projects. This bias is exacerbated if managers compete for limited resources in an internal capital market, which provides us with a novel theory of the boundaries of the firm. Finally, managers of more risky and less profitable divisions should obtain steeper incentives to facilitate efficient investment decisions.
- Language
-
Englisch
- Bibliographic citation
-
Series: IMFS Working Paper Series ; No. 33
- Classification
-
Wirtschaft
- Event
-
Geistige Schöpfung
- (who)
-
Inderst, Roman
Klein, Manuel
- Event
-
Veröffentlichung
- (who)
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Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
- (where)
-
Frankfurt a. M.
- (when)
-
2009
- Handle
- URN
-
urn:nbn:de:hebis:30-72931
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Inderst, Roman
- Klein, Manuel
- Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
Time of origin
- 2009
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Reciprocity and Incentive Pay in the Workplace
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