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Article
Publication date: 17 October 2016

David Parker

The purpose of this paper is to investigate the property investment decision-making process of Australian unlisted property funds.

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Abstract

Purpose

The purpose of this paper is to investigate the property investment decision-making process of Australian unlisted property funds.

Design/methodology/approach

Drawing on previous research into property investment decision making by Australian REITs, a normative model of the unlisted property fund investment decision-making process is proposed. Based on exploratory investigation through semi-structured interviews with senior Australian unlisted property fund decision makers, a descriptive model of the property investment decision-making process by Australian unlisted property funds is developed. The normative model and descriptive model are compared and a prescriptive model of the Australian unlisted property fund investment decision-making process proposed.

Findings

A four-stage, 20-step process proposed in the normative model was found to be generally supported by the descriptive model developed, potentially comprising a possible prescriptive model for the Australian unlisted property fund investment decision-making process.

Research limitations/implications

Further research is required to investigate risk-return issues, whether the prescriptive model is generalisable across other property investment decision-making groups or over time and whether it may lead to “good” decisions.

Practical implications

The prescriptive model proposed may contribute consistency and transparency to the decision-making process, if adopted by Australian unlisted property funds, potentially leading to better decisions.

Social implications

Greater consistency and transparency in property investment decision making by Australian unlisted property funds may lead to the optimal allocation of capital and greater investor confidence in the sector.

Originality/value

The findings comprise the first possible prescriptive model of the Australian unlisted property fund investment decision-making process, forming a basis for comparative investigation of that process adopted by other property investment decision-making groups such as Australian REITs and Australian retail property funds.

Article
Publication date: 1 May 2007

Claire Roberts and John Henneberry

Studies of UK and US property investment markets have historically portrayed the decision‐making process as an exercise in rational analysis. This notion is fundamentally flawed…

4335

Abstract

Purpose

Studies of UK and US property investment markets have historically portrayed the decision‐making process as an exercise in rational analysis. This notion is fundamentally flawed as the concept of a perfect market has limited applicability to the real world context in which property investment decisions are taken. Investment decision‐making is neither clinical nor methodical but is undertaken by imperfect players in imperfect markets using imperfect information. The purpose of this paper is to explore the decision making processes of investors.

Design/methodology/approach

A normative‐behavioural framework incorporating heuristics is used, a technique whose application in property research has previously been limited to valuation. The empirical vehicle for the research was an exploration of the spatial dimension of office property investment in different European contexts.

Findings

The findings of in‐depth case studies of investment decision‐making in France, Germany and the UK indicate that the decision‐making process, as perceived by institutional investors, does not deviate significantly from normative models. However, investors tend to “collapse down” the decision‐making process, taking shortcuts to achieve (in some cases, predefined) investment outcomes. These short‐cuts potentially leave the decision‐making process open to the influence of bias, judgement and sentiment.

Originality/value

This study represents the first attempt to explore, empirically and in detail, the property investment decision‐making process.

Details

Journal of Property Investment & Finance, vol. 25 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 April 2014

Wejendra Reddy, David Higgins and Ron Wakefield

In Australia, the A$2.2 trillion managed funds industry including the large pension funds (known locally as superannuation funds) are the dominant institutional property…

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Abstract

Purpose

In Australia, the A$2.2 trillion managed funds industry including the large pension funds (known locally as superannuation funds) are the dominant institutional property investors. While statistical information on the level of Australian managed fund investments in property assets is widely available, comprehensive practical evidence on property asset allocation decision-making process is underdeveloped. The purpose of this research is to identify Australian fund manager's property asset allocation strategies and decision-making frameworks at strategic level.

Design/methodology/approach

The research was undertaken in May-August 2011 using an in-depth semi-structured questionnaire administered by mail. The survey was targeted at 130 leading managed funds and asset consultants within Australia.

Findings

The evaluation of the 79 survey respondents indicated that Australian fund manager's property allocation decision-making process is an interactive, sequential and continuous process involving multiple decision-makers (internal and external) complete with feedback loops. It involves a combination of quantitative analysis (mainly mean-variance analysis) and qualitative overlay (mainly judgement, or “gut-feeling”, and experience). In addition, the research provided evidence that the property allocation decision-making process varies depending on the size and type of managed fund.

Practical implications

This research makes important contributions to both practical and academic fields. Information on strategic property allocation models and variables is not widely available, and there is little guiding theory related to the subject. Therefore, the conceptual frameworks developed from the research will help enhance academic theory and understanding in the area of property allocation decision making. Furthermore, the research provides small fund managers and industry practitioners with a platform from which to improve their own property allocation processes.

Originality/value

In contrast to previous property decision-making research in Australia which has mainly focused on strategies at the property fund investment level, this research investigates the institutional property allocation decision-making process from a strategic position involving all major groups in the Australian managed funds industry.

Details

Journal of Property Investment & Finance, vol. 32 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 29 July 2014

David Parker

– The purpose of this paper is to investigate property investment decision making by Australian REITs.

4040

Abstract

Purpose

The purpose of this paper is to investigate property investment decision making by Australian REITs.

Design/methodology/approach

Through an extensive literature review, a normative model of the property investment decision-making process is proposed. Based on semi-structured interviews with senior Australian REIT decision makers, a descriptive model of the property investment decision-making process by Australian REITs is developed. The normative model and descriptive model are compared and a prescriptive model of the Australian REIT property investment decision-making process proposed.

Findings

With the four stage, 20-step process proposed in the normative model found to be generally supported by the descriptive model developed, this may potentially comprise an effective prescriptive model for the Australian REIT property investment decision-making process.

Research limitations/implications

Further research is required to investigate if the prescriptive model is generalisable across other property investment decision-making groups or over time and whether it may lead to “good” decisions.

Practical implications

The prescriptive model proposed may contribute consistency and transparency to the decision-making process, if adopted by Australian REITs, potentially leading to better decisions.

Social implications

Greater consistency and transparency in property investment decision making by Australian REITs may lead to the optimal allocation of capital and greater investor confidence in the sector.

Originality/value

The findings comprise the first prescriptive model of the Australian REIT property investment decision-making process, forming a basis for comparative investigation of that process adopted by other property investment decision-making groups.

Details

Journal of Property Investment & Finance, vol. 32 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 30 September 2019

Benjamin Gbolahan Ekemode and Abel Olaleye

In a bid to broaden the understanding of the real estate investment decision-making framework, the purpose of this paper is to examine the real estate asset allocation…

Abstract

Purpose

In a bid to broaden the understanding of the real estate investment decision-making framework, the purpose of this paper is to examine the real estate asset allocation decision-making practices of real estate funds in Nigeria, a developing economy. This is with a view to providing information toward enhancing real estate investment decisions.

Design/methodology/approach

A mixed-methods approach comprising a combination of literature review, expert interviews and semi-structured questionnaire survey is adopted for this study. Through literature review and expert interviews, the asset allocation decision-making process of institutional real estate funds was identified. Based on the literature review and expert discussions, a semi-structured questionnaire was developed and self-administered on fund/portfolio managers of 59 institutional real estate funds in Nigeria to investigate their asset allocation decision-making practice. Data were analyzed using descriptive and inferential statistics for the closed-ended questions while the open-ended questions were content analyzed.

Findings

The findings revealed that the asset allocation decision-making process utilized by public and private real estate funds follows an opportunistic asset accumulation approach. The decision-making process also varies depending on the nature of the fund. Further findings showed that government policies, political uncertainties and regulatory mechanism motivate asset allocation decisions. Moreover, majority of the sampled real estate funds employed a combination of in-house personnel and external consultants (hybrid), while mean/standard deviation and cash flow analysis (DCF, NPV) were mostly utilized by the funds in making property investment decisions.

Practical implications

The findings implied that the real estate asset allocation decision-making process of institutional property investors in Nigeria deviates from the normative model of the asset allocation process prescribed in the literature and varies depending on the nature of the real estate funds. As such, familiarization of institutional investors with government policies, political climate and other regulatory mechanism (barriers to entry) guiding the ownership and operation of real estate assets in the country could improve their real estate investment decisions.

Originality/value

The study complements and extends existing literature on real estate asset allocation decision-making process of institutional investors from the viewpoint of the actors involved in a developing African economy.

Details

Property Management, vol. 38 no. 3
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 September 1997

George E. Pinches and Diane M. Lander

Interviews in South Korea, Taiwan, Singapore, and India indicate net present value (NPV) is not widely employed in making capital investment decisions in these newly…

Abstract

Interviews in South Korea, Taiwan, Singapore, and India indicate net present value (NPV) is not widely employed in making capital investment decisions in these newly industrialized and developing countries. It is not from lack of knowledge about net present value: rather, it is due to (1) widespread violation of the assumptions underlying NPV, (2) the high risk/high return nature of the capital investments, and (3) the decision‐making process employed in making capital investment decisions. These same three conditions exist for many capital investment decisions made by firms in developed countries. Only by abandoning the static NPV approach, building in real options, and understanding and building in the decision‐making process will further advances be made in capital budgeting decision‐making. One of the key paradigms in finance is net present value (NPV). In order to maximize value, managers should accept all positive NPV investment projects, and reject all negative NPV projects. The issue becomes more complex when uncertainty is introduced, or, as in recent years, when real options to defer, abandon, expand, etc. are incorporated into the decision‐making process [e.g., Dixit and Pindyck (1994) and Trigeorgis (1995 and 1996)]. However, with these exceptions, the state of the art in capital investment decision‐making revolves around the simple statement—take all positive NPV projects. In practice, evidence from surveys and discussions with corporate executives indicates the message taught for the last 30 years in business schools has been heard and, to a large extent, acted upon by larger U.S., Canadian, and British‐based firms. While larger firms in North America, and to a lesser extent Western Europe, generally employ the static, or traditional, NPV framework for making, or assisting in making, capital investment decisions, less is known about the decision‐making process employed by firms in other parts of the world. The question addressed in this study is: “Do firms in other parts of the world, especially in newly industrialized or developing countries in the Asia Pacific region, employ NPV for making capital investment decisions?” The purposes of this study are threefold: (1) to report the results of a series of open‐ended interviews conducted in South Korea, Taiwan, Singapore, and India about the capital investment decision‐making process employed; (2) to understand why NPV is not widely employed in making capital investment decisions in these newly industrialized and developing countries; and, most important, (3) to indicate that NPV and the capital budgeting decision‐making process need rethinking and refocusing to make them more effective—in all countries, whether developed, newly industrialized, or developing. The paper proceeds in the following manner. Section I provides an introduction to the study. In Section II the results of the interviews are presented. In Section III patterns that emerged during the interview process are presented, along with a number of specific examples of the types of capital investment decisions being considered. In Section IV the assumptions underlying NPV are examined, and then risk/return and the decision‐making process are considered. Section V contains the discussion and conclusions.

Details

Managerial Finance, vol. 23 no. 9
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 29 May 2018

Natalia Saukkonen, Teemu Laine and Petri Suomala

To be utilized effectively in decision-making processes, management accounting (MA) information should fit the business context and at the same time reflect the roles…

2520

Abstract

Purpose

To be utilized effectively in decision-making processes, management accounting (MA) information should fit the business context and at the same time reflect the roles, responsibilities and values of the actors taking part in the decision-making. This study aims to investigate the limitations for MA information utilization in decision-making. In particular, this study explores limitations stemming from the decision-making process structure and the involvement of several managerial actors.

Design/methodology/approach

An exploratory case study of an energy company and its customer company illustrates the current challenges in providing and integrating MA information into decision-making. The analysis is focused on the analytical and actor-based features of the decision-making and thus the limitations for MA information utilization. As a part of the broader research process, the researchers facilitated a meeting in the customer company, where the actors relevant to investment decisions discussed the current limitations in utilizing MA information.

Findings

Analytical and actor-based features may take different forms in the decision-making. Some relevant MA information may not be included in an organization’s decision-making process structure that allows merely conventional, yet analytical, decision alternatives. At the same time, certain actors’ viewpoints (such as sustainability metrics) can be excluded from the process without considering the logic behind the exclusion. This case study identifies the following limitations, largely related to insufficient actor-based features in the decision-making: managers may lack expertise in the use of MA tools, managerial interaction may lack reflection on taken-for-granted assumptions, different managers may appreciate different scope, content and timing of MA information and the process structure can ignore the required managerial viewpoints.

Research limitations/implications

This study demonstrates that both the decision-making process structure and the needs of the several actors involved may lead to limitations for MA information utilization. Although many limitations stemmed from the insufficient actor-based orientation in the case study, introducing new MA analyses and extending the validity of analytical approaches may also help overcome some of the limitations. Further research should address possibilities to integrate different actors’ viewpoints with MA information already in the decision-making process structure, find ways to introduce MA information on unconventional decision alternatives and enable reflection among and about relevant actors with respect to decision-making. These means could lead to more effective utilization of MA information for decision-making and, consequently, economically viable decisions.

Originality/value

This study addresses the limitations in MA information utilization by combining the viewpoints of analytical decision-making processes and reflective actors, and thus unveils possibilities for enhancing MA practice.

Details

Qualitative Research in Accounting & Management, vol. 15 no. 2
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 1 December 2005

Nicos Sykianakis and Athanassios Bellas

This paper aims to provide a better understanding of the foreign direct investment (FDI) decision‐making process, and to explore the roles of management accounting information to…

6558

Abstract

Purpose

This paper aims to provide a better understanding of the foreign direct investment (FDI) decision‐making process, and to explore the roles of management accounting information to that.

Design/methodology/approach

An interpretive methodology was preferred, applying the case study method in a Greek company that had engaged in FDIs in the Balkans. In studying FDI decision‐making, the role of context (external environment and organisation) was taken into consideration.

Findings

The study reported here reveals that the FDI decision‐making process is cyclical in nature, with information continuously received, processed and used as feedback for subsequent action. This supports the view that the dichotomy between strategy formulation and implementation is a false one.

Practical implications

Although the FDI process should be recognised as iterative in nature, evidence from this study suggests that it can be thought of as comprising two main tasks, each of which makes different uses of management accounting information and reflects different decision‐making concerns. The first task concerns the decision whether or not to invest abroad while, the second task concerns decisions about how the project will be developed.

Originality/value

The implementation of capital investments enables the participation of various organizational actors trying to influence the final outcome of the process in line with their own interests. The recognition of differential political engagement within these two distinct decision‐making phases has implications for understanding capital investment practice and for reflecting on prior empirical evidence in this domain.

Details

Managerial Auditing Journal, vol. 20 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 10 May 2019

Carl-Christian Trönnberg and Sven Hemlin

The purpose of this study was to gain a better understanding of pension fund managers investment thinking when confronted with challenging investment decisions. The study focuses…

Abstract

Purpose

The purpose of this study was to gain a better understanding of pension fund managers investment thinking when confronted with challenging investment decisions. The study focuses on the theoretical question of how dual thinking processes in experts’ investment decision-making emerge. This question has attracted interest in economic psychology but has not yet been answered. Here, it is explored in the context of pension funds.

Design/methodology/approach

The sample included 22 pension fund managers. The authors explored their decision-making by applying the critical incident interview technique, which entailed collecting investment decisions that fund managers retrieved from recent memory (Flanagan, 1954). Questions concerned the investment situation, the decision-making process and the challenges and uncertainties the fund managers faced.

Findings

Many of the 61 critical incidents examined concerned challenging (mostly stock) investments based on extensive analysis (e.g. reliance on external analysts for advice; analysis of massive amounts of hard company and stock market information; scrutiny of company reports and personal meetings with CEOs). However, fund managers to a high degree based their decisions on soft information judgments such as experience and qualitative judgements of teams. The authors found heuristics, intuitive thinking, biases (sunk cost effects) and social influences in investment decision-making.

Research limitations/implications

The sample is small and not randomly selected.

Practical implications

The authors suggest anti-bias training and better acquaintance with human forecasting limitations for pension fund managers.

Originality/value

Pension fund managers’ investment thinking has not previously been investigated. The authors show the types of investment situations in which analytical and intuitive thinking and biases occur.

Details

Qualitative Research in Financial Markets, vol. 14 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 4 October 2011

Carlo Massironi and Marco Guicciardi

This paper aims to introduce the reader to investigate some aspects of investment decision making from a constructivist perspective.

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Abstract

Purpose

This paper aims to introduce the reader to investigate some aspects of investment decision making from a constructivist perspective.

Design/methodology/approach

The constructivist perspective is introduced in its dual nature of epistemology and of modelization. From constructivist epistemology, the paper mentions the corollaries of theoretical pluralism and cognitive pragmatism. From Kruglanski and Ajzen's Lay epistemology theory, the paper presents in more detail a constructivist modelization for the study and improvement of formal processes of investment decision making.

Findings

Beginning from the proposed framework, the paper indicates the lines for the development of a critical (or reflective) investment decision‐making attitude. This is an investment decision making which is able to reflect on its own constructs and cognitive processes in order to develop investment processes with a higher “constructivist awareness” and efficacy.

Originality/value

The proposed modelization can contribute to the work of those dedicated to the development of better formal processes of investment. The paper presents three examples of possible applications potentially useful for the improvement of the processes of asset valuation of value investors.

Details

Qualitative Research in Financial Markets, vol. 3 no. 3
Type: Research Article
ISSN: 1755-4179

Keywords

1 – 10 of over 68000