Abstract

http://ssrn.com/abstract=1571527
 
 

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Capital Allocation and Delegation of Decision-Making Authority within Firms


John R. Graham


Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Manju Puri


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

June 27, 2014


Abstract:     
We use a unique dataset of more than 1,000 Chief Executive Officers (CEOs) and Chief Financial Officers around the world to investigate the degree to which executives delegate financial decisions and the circumstances that drive variation in delegation. Delegation does not appear to be monolithic; instead, our results show that it varies across corporate policies and also varies with the personal characteristics of the CEO. We find that CEOs delegate decisions for which they need the most input and when they are overloaded. CEOs delegate financial decisions less when they are knowledgable (long-tenured or with a finance background). They delegate more when distracted by recent acquisitions, and they allocate capital based on “gut feel” and the personal reputation of the manager running a given division. Finally, corporate politics and corporate socialism affect capital allocation in European and Asian firms.

Number of Pages in PDF File: 52

Keywords: Delegation, CEOs, executives, capital structure, mergers and acquisitions, payout, corporate investment, capital allocation

JEL Classification: L20, L22, G30, G32, G34, G35

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Date posted: March 17, 2010 ; Last revised: October 3, 2014

Suggested Citation

Graham, John R. and Harvey, Campbell R. and Puri, Manju, Capital Allocation and Delegation of Decision-Making Authority within Firms (June 27, 2014). Available at SSRN: http://ssrn.com/abstract=1571527 or http://dx.doi.org/10.2139/ssrn.1571527

Contact Information

John Robert Graham (Contact Author)
Duke University ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Campbell R. Harvey
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Manju Puri
Duke University - Fuqua School of Business ( email )
1 Towerview Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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