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Article
Publication date: 1 March 2010

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Journal of Public Budgeting, Accounting & Financial Management, vol. 22 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 January 1996

Lawrence Peter Shao and Alan T. Shao

The purpose of this study is to examine the capital budgeting strategies that are used by foreign subsidiaries of U.S.‐based multinational enterprises. While the results…

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1012

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The purpose of this study is to examine the capital budgeting strategies that are used by foreign subsidiaries of U.S.‐based multinational enterprises. While the results indicated a preference for sophisticated capital budgeting techniques as the primary method of analysis, the actual use of sophisticated capital budgeting techniques by foreign managers may not be as widespread as expected by financial theorists. Although it was found that certain environmental and company‐specific factors influenced the level of sophistication of capital budgeting practices used by U.S. foreign subsidiaries, the associations were small and had only minor explanatory significance. The results showed that foreign subsidiaries exposed to high levels of political and financial risk tended to use sophisticated capital budgeting strategies. Subsidiaries characterized by high levels of financial leverage and high cost of capital requirements also employed advanced capital budgeting strategies. Multinational enterprises (MNEs) have many options available to them in terms of how they manage their foreign subsidiaries. Traditionally, most major policy decisions were made at the parent firm's headquarter office while foreign subsidiaries had few opportunities to influence major corporate decisions. Today, more companies are using a flexible approach which involves setting strategic goals at the home office and allowing local managers to implement their own specific policies. An important question in this study involved determining how effective local foreign managers were in implementing their capital budgeting processes. As U.S.‐based MNEs continue to expand their operations abroad, there is an increased need to examine which financial decision models are actually used by subsidiary managers to deal with the increased complexity of investing in foreign countries. Unlike traditional capital budgeting analysis, international analysis is a considerably more complex process. These complexities occur for a number of reasons including complicated cash flows estimates, changes in foreign exchange rates, different accounting systems, potential for blocked funds, and political risk considerations. These factors are rarely experienced by traditionally domestic U.S. firms. To maintain a competitive edge, MNEs must continue to use the most efficient approaches available to them. This study provides a detailed analysis of the capital budgeting practices that are actually being used by foreign subsidiaries of U.S.‐based MNEs. The paper is organized in the following manner. Section I provides a brief overview of the theoretical and practical issues of international capital budgeting analysis. Section II focuses on the areas of data collection, questionnaire design, and environment‐specific and company‐specific factors. Section III discusses usage of capital budgeting techniques, adjustment and assessment of project risk, and factors influencing capital budgeting policies. The final section presents some findings from this study.

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Managerial Finance, vol. 22 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 6 November 2018

Afeera Mubashar and Yasir Bin Tariq

The purpose of this paper is to examine the current trends of capital budgeting practices (analysis techniques, discount rate estimations and risk assessment methods…

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1164

Abstract

Purpose

The purpose of this paper is to examine the current trends of capital budgeting practices (analysis techniques, discount rate estimations and risk assessment methods) among Pakistani listed firms and analyze the responses conditional on firms’ demographics and executive characteristics.

Design/methodology/approach

An online questionnaire was sent via e-mail to top 200 non-financial firms (in terms of market capitalization) listed on Pakistan Stock Exchange.

Findings

With a response rate of 35 percent, it is concluded that the theory–practice gap is low as Pakistani listed firms are using discounted cash flow methods of capital budgeting and preferring net present value over internal rate of return. Similarly, weighted average cost of capital is estimated using target value weights, and capital asset pricing model (with extra risk factors) is used to determine the cost of equity capital. For risk assessment, sensitivity analysis and scenario analysis are the dominant approaches; however despite the theoretical superiority, the use of real options is very low. Overall, investment decision responses significantly differ across firm’s demographics and executive characteristics.

Practical implications

Pakistani business schools need to address the low usage of advanced methods such as modified internal rate of return and real options among Pakistani listed firms.

Originality/value

This is the first comprehensive study on the topic in Pakistan and have highlighted the areas of capital budgeting where Pakistani firms’ practices deviates from finance theory.

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Journal of Advances in Management Research, vol. 16 no. 2
Type: Research Article
ISSN: 0972-7981

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Article
Publication date: 8 January 2021

Isabella M. Nolte, Tobias Polzer and Johann Seiwald

Gender budgeting aims to include a gender perspective at all stages of the budgetary process. Emerging economies (EEs) face different challenges in gender equality to…

Abstract

Purpose

Gender budgeting aims to include a gender perspective at all stages of the budgetary process. Emerging economies (EEs) face different challenges in gender equality to high-income economies–with larger informal economic sectors that typically employ a larger proportion of women and weaker political accountability. We analyse the literature on gender budgeting in EEs and derive avenues for future research.

Design/methodology/approach

Adopting a systematic literature review, we investigate the focus of research on gender budgeting in EEs and analyse how the literature has developed over the last decade.

Findings

Our results show that gender budgeting is a relevant topic in EEs. The literature focuses on overall rationales for employing gender budgeting and its theoretical implementation. However, many studies remain explorative, reviewing existing content without collecting new and potentially more suitable data. The evidence on the success of gender budgeting initiatives is mixed. While a number of studies present positive experiences regarding certain aspects of gender budgeting, other studies discuss a decoupling between adopted instruments and their actual use, as well as projects not being further pursued or developed when donors retreat.

Originality/value

Given the identified lack of studies reporting on actual implementation experiences, future research should address gender budgeting from an accounting and accountability perspective and focus on the reform impacts.

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Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 1 March 2000

Kurt Thurmaier

How analysts make recommendations to the budget director and governor depends partly on the nature of the state budget office (SBO). This paper contrasts the development…

Abstract

How analysts make recommendations to the budget director and governor depends partly on the nature of the state budget office (SBO). This paper contrasts the development of a budget recommendation in an office with a strong policy orientation with recommendations fashioned in an office with a strong control orientation. One important difference is that control oriented analysts focus almost exclusively on the technical and legal facets of budget problems, whereas their policy oriented counterparts spend considerable time on the social, legal, and political (SLP) facets. The SLP framework enables the policyoriented analysts to apply economic rationality to evaluate requests and make recommendations that are consonant with the governor’s policy agenda.

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Journal of Public Budgeting, Accounting & Financial Management, vol. 12 no. 4
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 5 May 2015

Mohamed Nurullah and Lingesiya Kengatharan

– The purpose of this paper is to investigate prevailing capital budgeting practices in Sri Lankan listed companies.

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3080

Abstract

Purpose

The purpose of this paper is to investigate prevailing capital budgeting practices in Sri Lankan listed companies.

Design/methodology/approach

A comprehensive primary survey was conducted of 32 out of 46 chief financial officers (CFOs) of manufacturing and trading companies listed on the Colombo Stock Exchange in Sri Lanka. Garnered data were then analyzed using appropriate statistical techniques.

Findings

The results revealed that net present value (NPV) was the most preferred capital budgeting method, followed closely by payback (PB) and internal rate of return (IRR). Similarly, sensitivity analysis was regarded as the dominant capital budgeting tool for incorporating risk and the widely used method for calculating cost of capital was the weighted average cost of capital. Moreover, results revealed that size of the capital budget affects the use of the capital budgeting methods (NPV, IRR and PB) and incorporating risk tool (sensitivity analysis and simulation). Further, results revealed that CFOs had higher educational qualification were preferred to use sophisticated capital budgeting practices dominantly NPV, IRR and incorporating risk tool of sensitivity analysis although they were found to be reluctant in use of accounting rate of return. In a similar vein CFOs with higher experience were preferred using IRR and sensitivity analysis.

Originality/value

This study contributed to academics, practitioners, policy makers and stakeholders of the company. Moreover, this research has proffered a more reliable and comprehensive analysis of capital budgeting practices in Sri Lankan listed manufacturing and trading firms. Since Sri Lanka is an unexplored country on capital budgeting practices, this research was originally contributed to the extant literature per se.

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Journal of Advances in Management Research, vol. 12 no. 1
Type: Research Article
ISSN: 0972-7981

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Book part
Publication date: 14 December 2004

Peter Chalos, Margaret Poon, Dean Tjosvold and W.J. Dunn

Organizations rely on budget teams for capital investment decisions. This study examined conditions that affected budget team performance. Variables included the…

Abstract

Organizations rely on budget teams for capital investment decisions. This study examined conditions that affected budget team performance. Variables included the formulation of cooperative, competitive and independent team budget goals and the mediating effect of budget information analysis between goals and budget performance. Two antecedents to budget goal formulation were examined, the budget knowledge of individual team members and organizational feedback control. Posited hypotheses were supported. Asymmetric budget knowledge between team members significantly increased independent and competitive budget goals and decreased cooperative budget goals. Organizational controls discouraged independent and competitive goals and encouraged cooperative budget goals. Cooperative (competitive and independent) budget goals improved (hindered) budget information analysis that in turn positively (negatively) affected budget performance.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-280-1

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Article
Publication date: 21 March 2016

Eugenio Anessi-Pessina, Carmela Barbera, Mariafrancesca Sicilia and Ileana Steccolini

Budgeting is central in public organizations. From a research viewpoint, it is an extremely multifaceted and potentially rich field to investigate and develop. The…

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5445

Abstract

Purpose

Budgeting is central in public organizations. From a research viewpoint, it is an extremely multifaceted and potentially rich field to investigate and develop. The changing institutional and socio-economic landscape, moreover, requires a profound reassessment of its roles and features in accounting studies. The purpose of this paper is to review the existing European literature on public budgeting, looking at how public administration, public management, and accounting contribute to current budgeting theories and practices and to advance a proposal on how they can individually and jointly contribute in the future.

Design/methodology/approach

The authors collect and analyze all the papers on public budgeting in the European context that were published in all the issues of 15 major accounting and public-management journals since 1980.

Findings

Budgeting has so far played a rather marginal role in European public management and accounting research. Among the existing papers, most focus on the Anglo-Saxon context, look at the intra-organizational aspects of budgeting, emphasize its managerial and allocative functions, either adopt an interpretive theoretical framework or make no explicit reference to theory, and rely on qualitative analyses. Public budgeting lies at the intersections between different disciplines and professions, but this multifacetedness has been largely neglected by the existing literature. These intersections thus offer significant opportunities for future research. Building on the distinction between the intra- and inter-organizational foci of budgeting, between its different functions (i.e. allocative, managerial, external accountability), and between the accounting and the public administration and management perspectives, the authors propose possible future research topics.

Originality/value

Budgeting plays a central role in public organizations and is used to allocate a large share of national incomes. This paper explores the existing literature and puts forward some potentially fruitful avenues for future research.

Details

Accounting, Auditing & Accountability Journal, vol. 29 no. 3
Type: Research Article
ISSN: 0951-3574

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Book part
Publication date: 14 July 2006

Adam S. Maiga

This study uses a path analytic model to investigate the influence of fairness (i.e., procedural fairness, distributive fairness, and interactional fairness) on managers…

Abstract

This study uses a path analytic model to investigate the influence of fairness (i.e., procedural fairness, distributive fairness, and interactional fairness) on managers’ budget satisfaction and the influence of managers’ budget satisfaction on budget performance. To this end, data from 92 U.S. individual managers are used for the study. The results show that fairness perceptions have a significant positive impact on budget satisfaction which, in turn, positively affects budget performance. Further analyses indicate that budget satisfaction mediates the relationship between fairness measures and budget performance. The implications, limitations, and directions for future research are discussed.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-448-5

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Abstract

Details

Advances in Accounting Education Teaching and Curriculum Innovations
Type: Book
ISBN: 978-0-85724-052-1

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