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Organizational Structure and Investment Strategy

出版	Centre for Economic Policy Research, 2020
URL	http://books.google.com.hk/books?id=22X-zgEACAAJ&hl=&source=gbs_api

註釋We show that a firm can use its organizational structure to commit to an investment strategy. The firm delegates sequential search and project management tasks to a manager. Ex post, the firm turns away projects that generate high project management rent. However, because the expectation of such rent serves to defray the manager's search cost, investment might be optimal ex ante. A leveraged subsidiary mitigates this time-inconsistency problem by creating ex post risk-shifting incentives that counteract underinvestment. Subsidiaries are more valuable for projects with costly search, intermediate management costs, and returns that are uncorrelated with the existing business.