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A Survey of Managerial Incentives and Investment Bias — Common Structure but Differing Assumptions

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  • Erik Bohlin

Abstract

Recent models within the agency framework concerning investment bias are reviewed, based upon a simplified structure of the pertinent information asymmetry. Tabulated overviews of contractual structures, critical assumptions, main and ancillary results, implications for future research and management are provided. As a general conclusion, the theoretical case of investment bias is rich and wide‐ranging. It is now of interest to develop models and perspectives that focus more on economic fundamentals rather than pursuing additional variations of particular assumptions. Moreover, further research is needed in empirical testing and case studies. In particular, the framework promises to bring new perspectives and managerial implications on the administrative use of capital budgeting methods.

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  • Erik Bohlin, 1997. "A Survey of Managerial Incentives and Investment Bias — Common Structure but Differing Assumptions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(2), pages 197-248, March.
    • Handle: RePEc:bla:jbfnac:v:24:y:1997:i:2:p:197-248
    DOI: 10.1111/1468-5957.00102
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    Cited by:

    1. Chirinko Robert & Garretsen Harry & Ees Hans van & Sterken Elmer, 2004. "Investor Protections and Concentrated Ownership: Assessing Corporate Control Mechanisms in the Netherlands," German Economic Review, De Gruyter, vol. 5(2), pages 119-138, May.
    2. George Christodoulakis, 2012. "Conditions for rational investment short-termism," Annals of Finance, Springer, vol. 8(1), pages 15-29, February.
    3. Robert Rieg, 2015. "Dynamics of value-based management: does shareholder value cause short-termism?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(2), pages 193-224, August.

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