Despite the advantages that the VoFI approach offers compared with traditional capital budgeting methods, its application for the appraisal of information technology (IT…
Despite the advantages that the VoFI approach offers compared with traditional capital budgeting methods, its application for the appraisal of information technology (IT) and information systems (IS) investments in both research and practice is not widespread to date. Given the static nature of the generic VoFI table, the method reaches its limits in its financial plan form because it is unable to investigate the dynamic behaviour of complex investment calculations. To date, there has been no attempt to address these shortcomings to advance the use of VoFI as a useful and valid capital budgeting method in finance and accounting. Therefore, the purpose of this study is to address this research gap and aim at developing a ‘dynamic’ VoFI model that integrates all input variables and target measures of a VoFI table and visualises the causal relationships among these variables.
The ‘dynamic’ VoFI model is developed through System Dynamics (SD) modelling to enhance the strength of the VoFI concept as an instrument for visualising the financial implications of investments in IT and IS at the corporate level. Case study research is used as a research method to study the behaviour of the developed model. The validity of the model is demonstrated by conducting simulation runs in Vensim software. In addition, probabilistic sensitivity analyses are performed to account for the impact of uncertainty on the main model variables.
The results demonstrate the usefulness of SD modelling for extending the generic VoFI concept by integrating risk analyses and providing a new strategy of data analysis and data presentation different from the typical financial plan form. Furthermore, the dynamic VoFI model enables the visualisation of interdependencies among the various variables incorporated in the VoFI financial plan, which significantly enhances the conceptual understanding of the investment and its financial consequences.
The integration of the VoFI concept into an SD model helps researchers and practitioners to enhance their conceptual understanding of this method. This thus increases its acceptance and popularity as a practical capital budgeting method, especially for the financial assessment of IT and IS investments. The VoFI model proposed in this paper should also enable analysts and decision makers to become more conscious of the interdependencies between the assumptions made for an appraisal and the quantitative results.
The purpose of this paper is to close the transparency gap by comparing ex ante and ex post performance disclosure, thus providing important conclusions regarding the…
The purpose of this paper is to close the transparency gap by comparing ex ante and ex post performance disclosure, thus providing important conclusions regarding the transparency of this important German market segment.
Closed-ended real estate funds (CEREFs) are one of the biggest segments of unlisted private equity funds in Germany. CEREFs have a central “profitability promise” that is based on ex ante forecasts given in the prospectus. Typically, equity is tied to these investments for up to 20-30 years, leaving investors highly insecure whether their expectations will be fulfilled and fund managers actually achieve prospected performances ex post.
The performance variance analysis of all German CEREFs outstanding during the global financial crisis reveals that prospect-performance disclosures as well as prospect-performance variances cause substantial problems in Germany due to overestimation biases of many fund managers.
As typical for the recent scholarly debate, also the past disclosure practice in Germany prohibits a long-term performance analysis, unless researchers apply instruments of modern investment analysis like comprehensive financial plans (“Visualisation of Financial Implications)”.
The transparency developments in CEREF-reporting of the last decade deliver precise recommendations regarding the internal and external performance variance analysis, risk-profiles and stress tests for the future fund management.
The introduced methodology would increase transparency in the segment of CEREF and, thus, improve investor protection. Since private households in Germany mainly acquire these funds, this is a contribution to sustainability in private asset management.
The paper develops a new methodological framework for performance measurement of unlisted funds. It then assesses for the first time the impact of transparency and trust on fund performances by applying a performance variance analysis.
Information technology (IT) expenses constitute an important factor when choosing efficient IT systems. Especially with regard to cloud computing (CC), decision-makers…
Information technology (IT) expenses constitute an important factor when choosing efficient IT systems. Especially with regard to cloud computing (CC), decision-makers tend to associate cost benefits. In this context, cloud providers present often undifferentiated sample calculations which aim to verify the financial favorability of their IT solutions. However, the scientific literature tries to encounter this by means of various total costs of ownership approaches. But science mostly neglects essential factors and does not provide an integrated approach involving factors, such as cost of capital, taxation effects, use intensity or duration of use. Hence, the purpose of this study is to involve these factors accordingly.
The paper uses a multi-method approach. First, existing literature is analyzed by a systematic literature review. Afterwards, the initial model is developed by means of a formal notation. Finally, the suitability of the formal model is evaluated by a real-life case study, where simulation software is used for investigating various scenarios.
The underlying paper discusses a formal model which integrates the four stated factors and enables decision-makers to compare cloud-based IT services on a comprehensive financial basis. Thus, the rational cost comparisons with traditional IT systems such as on-premise (OP) increase the transparency of the CC field significantly.
This paper shows impressively the importance of the four mentioned factors and their influence on the decision whether to implement cloud services or OP services. Herein, to the best of our knowledge and for the first time, a cash-flow-based comparison model is created for comparing cloud services and OP solutions.