Opportunism in Capital Budget Recommendations: The Effects of Past Performance and Its Attributions

摘要

This study uses an experiment to examine the separate and combined effects of managers' loss aversion and their causal attributions about their divisions' performance on tenden- cies to make goal-incongruent capital budge recommendations. We find that mangers' recommendations are biased by their loss aversion. In particular, managers of high-per- forming divisions are more likely than managers of low-performing divisions to propose investments that maximize their division's short-term profits at the expense of the firm's long-term value.