Abstract

http://ssrn.com/abstract=1919444
 
 

Citations (17)



 


 



Capital Allocation and Delegation of Decision-Making Authority within Firms


John R. Graham


Duke University; 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)

August 2011

NBER Working Paper No. w17370

Abstract:     
We survey more than 1,000 CEOs and CFOs to understand how capital is allocated, and decision-making authority is delegated, within firms. We find that CEOs are least likely to share or delegate decision-making authority in mergers and acquisitions, relative to delegation of capital structure, payout, investment, and capital allocation decisions. We also find that CEOs are more likely to delegate decision authority when the firm is large or complex. Delegation is less likely when the CEO is particularly knowledgeable about a project, when the CEO has an MBA degree or long tenure, and when the CEO's pay is tilted towards incentive compensation. We study capital allocation in detail and learn that most companies allocate funds across divisions using the net present value rule, the reputation of the divisional manager, the timing of a project‟s cash flows, and senior management's "gut feel." Corporate politics and corporate socialism are more important allocation criteria in foreign countries than in the U.S.

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Number of Pages in PDF File: 53

working papers series


Date posted: August 30, 2011  

Suggested Citation

Graham, John R. and Harvey, Campbell R. and Puri, Manju, Capital Allocation and Delegation of Decision-Making Authority within Firms (August 2011). NBER Working Paper No. w17370. Available at SSRN: http://ssrn.com/abstract=1919444

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)
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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