TY  - JOUR
AU  - Stein,Jeremy C.
TI  - Agency, Information and Corporate Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8342
PY  - 2001
Y2  - June 2001
UR  - http://www.nber.org/papers/w8342
L1  - http://www.nber.org/papers/w8342.pdf
N1  - Author contact info:
Jeremy C. Stein
Department of Economics
Harvard University
Littauer 209
Cambridge, MA  02138
Tel: 617/496-6455
Fax: 617/496-7352
E-Mail: jeremy_stein@harvard.edu
AB  - This essay surveys the body of research that asks how the efficiency of corporate investment is influenced by problems of asymmetric information and agency.  I organize the material around two basic questions.  First, does the external capital market channel the right amount of money to each firm?  That is, does the market get across-firm allocations right, so that the marginal return to investment in firm i is the same as the marginal return to investment in firm j?  Second, do internal capital markets channel the right amount of money to individual projects within firms?  That is, does the internal capital budgeting process get within-firm allocations right, so that the marginal return to investment in firm i's division A is the same as the marginal return to investment in firm i's division B?  In addition to discussing the theoretical and empirical work that bears most directly on these questions, the essay also briefly sketches some of the implications of this work for broader issues in both macroeconomics and the theory of the firm.
ER  -