The impact of capital proposal guidelines and perceived preparer biases on reviewersâ€™ investment evaluation decisions
AbstractPast literature has highlighted the importance of using reviewers in the evaluation of investment proposals. This study examines whether and how the decisions of these reviewers are influenced by a proposalâ€™s conformance with company guidelines and practices, and the incentives facing the proposal preparer. Our experiment shows that, holding the proposalâ€™s content constant, the reviewersâ€™ evaluation decision is less favourable if the proposal does not follow the company guidelines. Further, we find that the preparerâ€™s incentive to persist in a project negatively affects the proposal reviewersâ€™ decisions only when the proposal deviates from company guidelines but not when it is compliant. This result suggests that company guidelines may lower the willingness of reviewers to make independent decisions.
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Bibliographic InfoArticle provided by Australian School of Business in its journal Australian Journal of Management.
Volume (Year): 36 (2011)
Issue (Month): 3 (December)
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Web page: http://www.agsm.edu.au
capital budgeting proposals; capital investment evaluation decisions; preparer biases; rule compliance;
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