This post comes to us from John Graham, Professor of Finance at Duke University, Campbell Harvey, Professor of International Business at Duke University, and Manju Puri, Professor of Finance at Duke University.
In our paper Capital Allocation and Delegation of Decision-Making Authority within Firms, which was recently published on SSRN, we examine the allocation of capital and the delegation of decision-making authority within firms. Theoretical research examines how decision-making authority is delegated within groups. While the theoretical implications are far-ranging, there is a scarcity of empirical evidence about the delegation of authority within corporations (as noted by Prendergast (2002) and others). This paper provides some of the first empirical evidence that focuses on the delegation of decision-making authority with respect to major corporate policies. In particular, we study whether the chief executive makes decisions on her own versus delegating to lower-level executives and divisional managers.
We survey more than 1,000 CEOs and CFOs around the world to determine who within the firm makes five different corporate decisions: capital allocation, capital structure, investment, mergers and acquisitions, and payout. Most of our analysis focuses on the 950 CEO and 525 CFO survey respondents who work in U.S.-based companies, though we also examine smaller samples of Asian and European executives. Knowing the job title of the corporate decision-maker is important, given recent evidence that executive-specific fixed effects appear to drive some corporate policies.