Sunflower Management and Capital Budgeting

Arnoud Boot, Todd T. Milbourn (milbourn@olin.wustl.edu) and Anjan Thakor (thakor@wustl.edu)
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Todd T. Milbourn: Washington University in St Louis

No 02-059/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In organizations, ideas are often delegated for evaluation as a means of efficiently aggregating multiple information signals. However, those who delegate often find it impossible to separate the evaluation of the ideas they delegate from the evaluation of abilities of those delegated the task of assessing these ideas. This commingling of the assessment of the idea with that of the individual agent generates a tendency for the agent to ignore his or her own information and instead attempt to confirm the superior's prior belief. We refer to this as sunflower management and examine its effects on capital budgeting practices.

This discussion paper has resulted in a publication in the Journal of Business , 2005, 78(2), 501-27.

Keywords: management science; capital investments; budget; capital budget (search for similar items in EconPapers)
Date: 2002-06-21
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Journal Article: Sunflower Management and Capital Budgeting (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20020059

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