In an experiment, we model two stylized facts about capital budgeting practice, budgetary slack creation and delegation of decision-making authority. In our setting, under centralization, headquarters announces a budget, the division manager gives a cost report, and headquarters decides on the...

This experimental study investigates the use of audits as a control instrument in capital budgeting processes and factors that contribute to audit efficiency (or inefficiency) in a repeated relationship. We disentangle reputation aspects of superiors and subordinates from an increased social...