Internal Capital Markets and Firm-Level Compensation Incentives for Division Managers

  title={Internal Capital Markets and Firm-Level Compensation Incentives for Division Managers},
  author={Julie Wulf},
Do multi-divisional firms structure compensation contracts for division managers to mitigate information and incentive problems in their internal capital markets? Using Compustat Segment financial data and compensation data from a proprietary survey, I find evidence that compensation and investment incentives are substitutes: firms providing a stronger link to firm performance in incentive compensation for division managers also provide weaker investment incentives through the capital budgeting… CONTINUE READING
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