A Survey of Managerial Incentives and Investment Bias — Common Structure but Differing Assumptions

Recent models within the agency framework concerning investment bias are reviewed, based upon a simplified structure of the pertinent information asymmetry. Tabulated overviews of contractual structures, critical assumptions, main and ancillary results, implications for future research and management are provided. As a general conclusion, the theoretical case of investment bias is rich and wide-ranging. It is now of interest to develop models and perspectives that focus more on economic fundamentals rather than pursuing additional variations of particular assumptions. Moreover, further research is needed in empirical testing and case studies. In particular, the framework promises to bring new perspectives and managerial implications on the administrative use of capital budgeting methods.