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Evaluating the Capacity of Standard Investment Appraisal Methods

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Author Info
Mehari Mekonnen Akalu () (Erasmus University Rotterdam)
Abstract

The survey findings indicate the existence of gap between theory and practice of capital budgeting. Standard appraisal methods have shown a wider project value discrepancy, which is beyond and above the contingency limit. In addition, the research has found the growing trend in the use of value management models. The presence of correlation between the frequency of monitoring and project value discrepancy, and the absence of uniformity in the use of evaluation methods throughout the life span of a project are among the results of the study.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-082/1.

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Date of creation: 20 Aug 2002
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Handle: RePEc:dgr:uvatin:20020082

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: Capital Budgeting Investment Appraisal DCF Methods Project Analysis Shareholder Value Analysis Value Management Techniques.

Find related papers by JEL classification:
G30 - Financial Economics - - Corporate Finance and Governance - - - General
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
L6 - Industrial Organization - - Industry Studies: Manufacturing
L8 - Industrial Organization - - Industry Studies: Services
L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
M10 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - General
O22 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Harris, Milton & Raviv, Artur, 1998. "Capital budgeting and delegation1," Journal of Financial Economics, Elsevier, vol. 50(3), pages 259-289, December. [Downloadable!] (restricted)
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  2. Harris, Milton & Raviv, Artur, 1996. " The Capital Budgeting Process: Incentives and Information," Journal of Finance, American Finance Association, vol. 51(4), pages 1139-74, September. [Downloadable!] (restricted)
  3. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May. [Downloadable!] (restricted)
  4. Schall, Lawrence D & Sundem, Gary L & Geijsbeek, William R, Jr, 1978. "Survey and Analysis of Capital Budgeting Methods," Journal of Finance, American Finance Association, vol. 33(1), pages 281-87, March. [Downloadable!] (restricted)
  5. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 27(5&6), pages 603-626. [Downloadable!] (restricted)
  6. Peterson, Robert A, 1994. "A Meta-analysis of Cronbach's Coefficient Alpha," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 21(2), pages 381-91, September.
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