Capital allocation and delegation of decision-making authority within firms

John R. Graham, Campbell Harvey () and Manju Puri

Journal of Financial Economics, 2015, vol. 115, issue 3, 449-470

Abstract: We use a unique data set that contains information on more than 1,000 Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) around the world to investigate the degree to which executives delegate financial decisions and the circumstances that drive variation in delegation. Delegation does not appear to be monolithic; instead, our results show that it varies across corporate policies and also varies with the personal characteristics of the CEO. We find that CEOs delegate financial decisions for which they need the most input, when they are overloaded, and when they are distracted by recent acquisitions. CEOs delegate less when they are knowledgeable (long-tenured or with a finance background). Capital is allocated based on “gut feel” and the personal reputation of the manager running a given division. Finally, corporate politics and corporate socialism affect capital allocation in European and Asian firms.

Keywords: CEOs; Executives; Capital structure; Mergers and acquisitions; Payout; Corporate investment; Gut feel (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G35 L20 L22 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

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Related works:
Working Paper: Capital Allocation and Delegation of Decision-Making Authority within Firms (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:115:y:2015:i:3:p:449-470

DOI: 10.1016/j.jfineco.2014.10.011

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