IDEAS home Printed from
   My bibliography  Save this paper

Fifty years of Research on Accuracy of Capital Expenditure Project Estimates: A Review of the Findings and their Validity


  • Stefan Linder

    (WHU, Vallendar Germany)


Capital budgeting research has traditionally focused on ever improving the methods used for evaluating projects. Since it seems futile to use sophisticated evaluation techniques if their input data – that is, estimates of cash inflows and outflows – are of inferior quality, it is justifiable to call this focus into question by exploring forecasting accuracy. In order to do so, the article analyzes the empirical findings on estimation error gathered in 35 studies published between 1954 and 2002. As the review shows, over-optimism seems to be a relevant problem in capital expenditure project forecasting. This calls the traditional research focus into question. More research effort targeted at the misestimation bias in capital budgeting and at ways to improve forecasting accuracy seems necessary.

Suggested Citation

  • Stefan Linder, 2005. "Fifty years of Research on Accuracy of Capital Expenditure Project Estimates: A Review of the Findings and their Validity," Finance 0504023, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpfi:0504023
    Note: Type of Document - pdf; pages: 24. Working paper in Acrobat Reader format.

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Michael J. Turner & Chris Guilding, 2012. "Factors affecting biasing of capital budgeting cash flow forecasts: evidence from the hotel industry," Accounting and Business Research, Taylor & Francis Journals, vol. 42(5), pages 519-545, December.

    More about this item


    Capital budgeting; Capital Expenditures; Estimation Accuracy; Forecasting; Post-Audit.;

    JEL classification:

    • G - Financial Economics

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0504023. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.