Anmerkungen:
In: Journal of Institutional and Theoretical Economics, Vol.165, pp. 622-649, 2009
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 17, 2008 erstellt
Beschreibung:
This paper examines the agency cost of winner-picking in multi-divisional firms and uses explicit incentive contracts to analyze the interaction between corporate headquarters' investment and incentive policies. Winner-picking, i.e. the efficient reallocation of scarce resources in an internal capital market, adds an extra layer of noise to the moral-hazard problem of incentivizing division managers to produce the resources that can then be redistributed. In particular, division managers with strong future investment opportunities anticipate that headquarters bails them out should they fail to produce enough resources themselves. This reduces incentives to create the resources in the first place with possible consequences for the optimal investment policy