Arbeitspapier
Project selection, income smoothing, and Bayesian learning
Capital rationing is an empirically well-documented phenomenon. This constraint requires managers to make investment decisions between mutually exclusive investment opportunities. In a multiperiod agency setting, this paper analyses accounting rules that provide managerial incentives for efficient project selection. In order to motivate a shortsighted manager to expend unobservable effort and to make efficient investment decisions, the principal sets up an incentive scheme based on residual income (e.g. EVATM). The paper shows that income smoothing generates a trade-off between agency costs resulting from differences in discount rates and the costs associated with the congruity of residual earnings.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper Series: Finance & Accounting ; No. 116
Accounting
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
Asymmetric and Private Information; Mechanism Design
Performance Measurement
Residual Income
Investitionsentscheidung
Betriebliche Wertschöpfung
Projektbewertung
Prinzipal-Agent-Theorie
Lernprozess
Bayes-Statistik
Theorie
- Handle
- URN
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urn:nbn:de:hebis:30-17882
- Last update
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20.09.2024, 8:22 AM CEST
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
- Gaber, Christian
- Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften
Time of origin
- 2003