Socialism and Intrafirm Asset Allocation

Joerg, Petra; Loderer, Claudio F.; Roth, Lukas

doi:10.2139/ssrn.384701

Abstract

References (35)

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Socialism and Intrafirm Asset Allocation

Petra Joerg

University of Berne - Institute for Financial Management

Claudio F. Loderer

University of Berne - Institute for Financial Management; European Corporate Governance Institute (ECGI); Swiss Finance Institute

University of Alberta - Department of Finance and Statistical Analysis

October 14, 2003

Abstract:
We rely on a survey of Swiss firms to document deviation from first-best for reasons of internal "fairness" when allocating resources. This "socialist" practice is more widespread in smaller than in larger firms. It ignores the reputation and past performance of the managers who apply for funding, but takes into account their hierarchical position and their past use of resources. Socialism is only partially explained by concerns about empire building and managerial optimism, and it is not meant to benefit shareholders.

Number of Pages in PDF File: 30

Keywords: Capital budgeting, Internal socialism, Empire building, Managerial optimism, Performance

JEL Classification: G31, L22, M14

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Date posted: April 14, 2003

Suggested Citation

Joerg, Petra, Loderer, Claudio F. and Roth, Lukas, Socialism and Intrafirm Asset Allocation (October 14, 2003). Available at SSRN: http://ssrn.com/abstract=384701 or http://dx.doi.org/10.2139/ssrn.384701

Contact Information

Petra Joerg University of Berne - Institute for Financial Management ( email ) Engehaldenstrasse 4 Bern, CH-3012 Switzerland
Claudio F. Loderer (Contact Author) University of Berne - Institute for Financial Management ( email ) Engehaldenstrasse 4 Bern, CH-3012 Switzerland +41 31 631 37 75 (Phone) +41 31 631 84 21 (Fax)
European Corporate Governance Institute (ECGI) ( email ) c/o ECARES ULB CP 114 B-1050 Brussels Belgium HOME PAGE: http://www.ecgi.org
Swiss Finance Institute ( email ) c/o University of Geneve 40, Bd du Pont-d'Arve 1211 Geneva, CH-6900 Switzerland HOME PAGE: http://www.sfi.ch
Lukas Roth University of Alberta - Department of Finance and Statistical Analysis ( email ) 2-32C Business Building Edmonton, Alberta T6G 2R6 Canada 780-492-4431 (Phone) 780-492-3325 (Fax)

Abstract

References (35)

Socialism and Intrafirm Asset Allocation

Petra Joerg

Claudio F. Loderer

Lukas Roth

Date posted: April 14, 2003

Suggested Citation

Contact Information

Petra Joerg

Claudio F. Loderer (Contact Author)

Lukas Roth