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The Dark Side of Internal Capital Markets : Divisional Rent-Seeking and Inefficient Investment

Scharfstein, David S. - 2008

We develop a model that shows how rent-seeking behavior on the part of division managers can subvert the workings of an internal capital market. In an effort to stop rent-seeking, corporate headquarters will be effectively forced into paying bribes to some division managers. And because...

Persistent link: https://www.econbiz.de/10012774955

Rent-Sharing, Holdup, and Wages : Evidence from Matched Panel Data

Card, David - 2010

When wage contracts are relatively short-lived, rent sharing may reduce the incentives for investment since some of the returns to sunk capital are captured by workers. In this paper we use a matched worker-firm data set from the Veneto region of Italy that combines Social Security earnings...

Persistent link: https://www.econbiz.de/10013140998

Limited Managerial Attention and Corporate Aging

Loderer, Claudio F. - 2013

As firms have more assets in place, more of management's limited attention is focused on managing assets in place rather than developing new growth options. Consequently, as firms grow older, they have fewer growth options and a lower ability to generate new growth options. This simple theory...

Persistent link: https://www.econbiz.de/10013076181

Firm-Specific Information and the Efficiency of Investment

Chari, Anusha - 2006

We use a new firm-level dataset to examine the efficiency of investment in emerging economies. In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 5.4 percentage points....

Persistent link: https://www.econbiz.de/10012780226

The Cost of Diversity : The Diversification Discount and Inefficient Investment

Rajan, Raghuram G. - 2006

In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these...

Persistent link: https://www.econbiz.de/10012783969

Tax Policy and Lumpy Investment Behavior : Evidence from China's Vat Reform

Chen, Zhao - 2019

We incorporate the lumpy nature of firm-level investment into the study of how tax policy affects investment behavior. We show that tax policies can directly impact the lumpiness of investment. Extensive-margin responses to tax policy are key to understanding the effects of different tax reforms...

Persistent link: https://www.econbiz.de/10012861224

Urban Vibrancy and Corporate Growth

Dougal, Casey - 2014

We find that a firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. It also responds to fluctuations in the cash flows and stock prices (q) of local firms outside its sector. These patterns do not appear to reflect...

Persistent link: https://www.econbiz.de/10013049693

How Does Government Borrowing Affect Corporate Financing and Investment?

Graham, John R. - 2014

Using a novel dataset of accounting and market information that spans most publicly traded nonfinancial firms over the last century, we show that U.S. federal government debt issuance significantly affects corporate financial policies and balance sheets through its impact on investors' portfolio...

Persistent link: https://www.econbiz.de/10013045580

Equity Vesting and Managerial Myopia

Edmans, Alex - 2014

This paper links the impending vesting of CEO equity to reductions in real investment. Existing studies measure the manager's short-term concerns using the sensitivity of his equity to the stock price. However, in myopia theories, the driver of short-termism is not the magnitude of incentives...

Persistent link: https://www.econbiz.de/10013063030

Firm-Level Investment in France and the United States : An Exploration of What We Have Learned in Twenty Years

Mairesse, Jacques; Hall, Bronwyn H.; Mulkay, Benoit - 2021

changes in modelling strategy and econometric methodology, over the past twenty years, on estimation of firm-level investment … correction, traditional between- and within-firm estimation versus GMM estimation, the investment behavior of French firms versus … significant improvement in the specification, estimation and interpretation of firm investment equations; we also fin some real …

Persistent link: https://www.econbiz.de/10013230971

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