New Publication Forthcoming: Sabotage in Capital Budgeting

The European Accounting Review has accepted the article “Sabotage in Capital Budgeting: The Effects of Control and Honesty on Investment Decisions” by Markus Brunner and Andreas Ostermaier. The authors investigate the sabotage of investments in response to hurdle contracts as a means of formal control in capital budgeting. They find that negative reciprocity leads managers to sabotage investments, but reporting requirements can help prevent sabotage. The paper highlights sabotage of investments as a hidden cost of control in budgeting.