Abstract
This paper analyses how influence activities in the form of signal jamming affect the capital budgeting process of corporate organisations in Australia. Empirical results suggest that investment sensitivity (the relationship between investment in the smallest segment and its past performances) is positive for Australian firms. However, when influence problems within a firm become more severe, mixed evidence is obtained for different measures of influence activity. With an increase in the number of segments, influence activity becomes more severe and headquarters relies more on a public signal. In contrast, with the increase in relatedness across segments, the influence problem increases and headquarters relies more on private information from the manager of the large segment. Evidence suggests that Australian firms provide high short-term incentive payments to managers of large segments to mitigate the influence activity problems, and thus rely more on managerial recommendations for investing in the smallest segment.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Economic Papers: A journal of applied economics and policy
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
