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Accounting for strategic investment decision-making under extreme uncertainty

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  • Elmassri, Moataz Moamen
  • Harris, Elaine Pamela
  • Carter, David Bernard

Abstract

This study focuses on processes employed by organisational managers making strategic investment decisions (SIDs) in an environment of extreme uncertainty in post-revolution Egypt. Our study illustrates how significant social, political and economic uncertainty impacts upon the utility of capital investment appraisal techniques employed in management accounting decision-making. To engage in this analysis, we employ strong structuration theory as a lens to examine how local Egyptian managers (agents-in-focus) respond to the impact of emergent structures that emanate from the post-revolutionary context in their strategic investment decision-making (SIDM). Our empirical evidence includes focused interviews with twenty-one local managers to understand the experience of accounting for decision-making under extreme uncertainty. Our analysis demonstrates that non-financial considerations and objectives take precedence over the technical ‘accounting’ measures, for example net present value (NPV) in post-revolution SIDM processes. In particular, recognising and responding to shifting labour power and short-term sacrifices (such as rejecting merger opportunities) become comparatively more important than the pre-supposed rationality of the NPV criteria. However, as multi-national corporations insist on the calculation of NPV by their Egyptian subsidiaries, local managers reproduce the imperfect NPV as a communication tool in relation to capital investment decisions, whilst resisting its persuasiveness in favour of more qualitative criteria.

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  • Elmassri, Moataz Moamen & Harris, Elaine Pamela & Carter, David Bernard, 2016. "Accounting for strategic investment decision-making under extreme uncertainty," The British Accounting Review, Elsevier, vol. 48(2), pages 151-168.
    • Handle: RePEc:eee:bracre:v:48:y:2016:i:2:p:151-168
    DOI: 10.1016/j.bar.2015.12.002
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    2. Andreas Stoller, 2022. "The Anchoring Effect In The Context Of Strategic Investment Decision Making," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 210-220.
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    6. Lee, Kenneth & Aleksanyan, Mark & Harris, Elaine & Manochin, Melina, 2023. "Throwing in the towel: what happens when analysts' recommendations go wrong?," LSE Research Online Documents on Economics 121412, London School of Economics and Political Science, LSE Library.

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