التفاصيل البيبلوغرافية
| العنوان: |
DECENTRALIZED CAPITAL BUDGETING DECISIONS AND SHAREHOLDER WEALTH MAXIMIZATION. |
| المؤلفون: |
LITZENBERGER, ROBERT H., JOY, O. MAURICE |
| المصدر: |
Journal of Finance (Wiley-Blackwell); Sep75, Vol. 30 Issue 4, p993-1002, 10p |
| مصطلحات موضوعية: |
CAPITAL budget, RATE of return, INVESTMENT policy, PORTFOLIO management (Investments), CORPORATE debt financing, STOCKHOLDER wealth, DECENTRALIZATION in management, FINANCE education, ECONOMIC value added (Corporations), DECISION making, MANAGEMENT |
| مستخلص: |
Our paper examines the capital budgeting criterion induced by control systems based on target rates of return on investment. A conflict is shown to exist between the corporate objectives of shareholder wealth maximization and the disparate decentralized decision making objectives. induced by enforcement rules based upon ex-post realization of a pre-specified target rate of return on investment. Even when a division's investment opportunities are within a single risk class, the division's target rate of return should not be specified as its cost of capital. A corporate policy of setting each division's target rate of return equal to the division's cost of capital is shown to induce accept/reject capital budgeting decisions that are inconsistent with shareholder wealth maximization. The apparent conflict between the corporate objective of shareholder wealth maximization and the disparate decentralized decision making objectives may be resolved by choosing an appropriate target rate of return for the subordinate unit. Properly specified target rates of return for each division induce decentralized capital investment decisions that are consonant with shareholder wealth maximization. [ABSTRACT FROM AUTHOR] |
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