Capital budgeting and managerial empire building
研究公司总部如何利用有帝国构建倾向的管理者报告进行资本预算决策和薪酬设计，发现管理者偏好过度投资会导致投资扭曲，且薪酬与帝国构建收益呈非单调关系。
I examine how a company's headquarters use an empire-building manager's report about decision-relevant private information to make capital budgeting decisions and compensate the manager. To this end, I construct a model comprising the headquarters (principal) and the manager (agent), who reports on the investment project's expected profitability. I identify the optimal investment sizes and compensation payments, where the headquarters trade off managerial information rents–arising from empire-building benefits inducing the manager to favour overinvestment–for investment efficiency. The headquarters counteract the manager's desire for overinvestment with investment distortions in the form of underinvestment (or overinvestment) for a high (or low) expected profitability. Due to these distortions, the expected compensation is not monotone in the level of empire-building benefits. Unlike previous capital budgeting studies, in this study, I show that managerial empire-building benefits can multi-directionally affect companies' optimal capital budgeting decisions and related compensation schemes.