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Managerial discretion and the choice of capital budgeting techniques

Author

Listed:
  • Zahida Sarwary
  • Timur Uman

Abstract

The purpose of this study is to apply Hambrick and Finkelstein's (1987) framework of managerial discretion to the field of capital budgeting techniques (CBT). This study uses a qualitative method based on semi-structured interviews with 12 CFOs in Swedish high-growth small and medium-sized (SMEs) firms. The findings indicate that the choice of CBTs is largely enabled by individual forces and mainly disabled by environmental and organisational forces. The study contributes with managerial implications discussing how the choice of CBT is beneficial for communication, negotiating for resources, and maintaining good relationships with stakeholders. Being aware of how to use the choice of CBT as a communication tool could give firms a competitive advantage.

Suggested Citation

  • Zahida Sarwary & Timur Uman, 2022. "Managerial discretion and the choice of capital budgeting techniques," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 14(3), pages 197-216.
    • Handle: RePEc:ids:injmfa:v:14:y:2022:i:3:p:197-216
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