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Socialism and Intrafirm Asset Allocation

30 Pages Posted: 14 Apr 2003  

Petra Joerg

University of Berne - Institute for Financial Management

Claudio F. Loderer

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

Lukas Roth

University of Alberta - Department of Finance and Statistical Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

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

JEL Classification: G31, L22, M14

Suggested Citation

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

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

Lukas Roth

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32E Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-4431 (Phone)
780-492-3325 (Fax)

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