Dissertationen zum Thema „Capital budgeting practice“

This thesis contributes to an understanding of capital budgeting and accounting practice. The factors affecting practice are of special research interest. It is also investigated whether practice diverges from what is prescribed by finance text books and accounting standards/frameworks. The overarching research question posed in this thesis is: “What capital budgeting and accounting choices are made by top management in practice, and how can these choices be explained?”. The thesis consists of four papers that address this issue. The first two papers focused on capital budgeting choices. Findings emphasised that the use of sophisticated capital budgeting and cost of capital estimation methods such as NPV and CAPM was widespread in Swedish listed companies. However, also unsophisticated accounting based methods were employed. Overall, findings suggested that Swedish companies used capital budgeting and cost of capital estimation techniques less often than did U.S./continental European companies. Other interesting findings were changes over time. Over time, the use of sophisticated methods increased and the use of unsophisticated methods decreased. This indicated a closing of the theory-practice gap. Finally, size was generally positively related to more extensive use of methods. The last two papers focused on accounting choices. Findings showed that non-preparers supported amortisation of goodwill to a greater extent than did preparers. Preparers instead supported the goodwill impairment-only approach. It was suggested that economic consequences could explain why preparers supported the goodwill impairment-only approach. When the impairment-only approach subsequently was introduced by the International Accounting Standards Board (IASB), Swedish and Dutch preparers however only disclosed slightly more than 60% of the assumptions underlying the impairment test, after three years of learning. Moreover, findings showed that the level of compliance with the IASB’s disclosure requirements was associated with industry; financials were less compliant than were non-financials. Findings also showed that Swedish and Dutch companies were more compliant in 2008 than they were in 2005, which suggested learning over time. Finally, in 2005 the disclosure compliance level was higher in Sweden than in the Netherlands. Three years later, 2008, the difference was eliminated, thus indicating convergence.

This paper examines the theoretical applicability and empirical rates of use for real options valuation and planning techniques. In theory, real options are the best valuation and planning tool for a biotechnology start-up, primarily due to the staged nature of investments and the discrete changes in probability between FDA approval stages. However, in a survey of 48 members of the Biotechnology Industry Association, results showed a low level of real options implementation. This paper then examines the possible reasons for the lack of implementation of real options and possible solutions, with the most popular surveyed reason being a lack of knowledge of the technique.

Capital budgeting is crucial in order for companies to sustain themselves, survive and flourish in markets and to increase shareholders' wealth. Nonetheless, decisions on capital budgeting are critical owing to the influence of uncertainty factors and dramatic changes in the environment milieu. Capital budgeting practices vary from country to country, from company to company and from project to project. Although many studies have been conducted in developed countries, there is a dearth of studies in emerging economies. Therefore, aims of this study were to investigate the prevalent choice of capital budgeting practices and influences of firms' characteristics on their choice based on Sri Lankan emerging market, identifying uncertainty factors and its influence on use of capital budgeting practices and explore the interacting effect of uncertainty factors between capital budgeting practices and performance, and finally, develop a capital budgeting model that would meld with the core components of uncertainty, firms' characteristics and firms' performance based on Sri Lankan market. The data for this study were garnered from primary data and secondary data collections. The primary data were collected from 186 CFOs working in companies listed on the Colombo Stock Exchange using self-administered questionnaires. The questionnaire was piloted with a sample of five CFOs. The secondary data were mainly collected from CSE via the Bloomberg website/annual reports. After the data were collected, they were analysed using multivariate analysis such as factor analysis, confirmatory factor analysis and structural equation modelling. This study revealed that the most popular capital budgeting technique used in Sri Lanka was NPV, followed by IRR, PB, ARR and DPB. As for capital budgeting tools incorporating risk, the most preferred method among Sri Lankan firms was uncertainty absorption in cash flows, followed by sensitivity analysis, probability analysis, scenario analysis, and adjusting the required return. Moreover, this study found that the most popular method for calculating cost of equity was the CAPM model followed by average historical returns on common stock. Emerging real options are at an embryonic stage in Sri Lanka. The use of naive capital budgeting practices was mostly preferred by small firms and mainly managed by CFOs with non-MBA educational qualifications and a short tenure. Sophisticated and advanced capital budgeting practices were used mostly by large firms; these were mainly managed by MBA qualified CFOs with a long tenure. As for industry differences, ARR was primarily applied by non-MBA CFOs and was also preferred by non-manufacturing firms. None of the other methods made any significant differences in terms of type of industry. This study found four new levels uncertainty: operational uncertainties (input, labour and production), financial uncertainties (interest rate, inflation and exchange rate), social uncertainty (policy, political and social) and market uncertainty (competitive, output market and input market). Apropos of the model, sophisticated capital budgeting practices were determined by the size of the capital budget, market uncertainty and financial uncertainty. Advanced capital budgeting practices were determined by the size of the capital budget, the educational qualifications of the CFOs, operational uncertainty and "~'U"''''lal uncertainty. In a similar vein, naive capital budgeting practices were determined by the size of the capital budget, the educational qualifications of the CFOs, industry and financial uncertainty. Moreover, this study found that social uncertainty moderates the relationship: between advanced capital budgeting practices and effectiveness, between sophisticated capital budgeting practices and Tobin_q and between advanced capital budgeting practices and Tobin_q. Overall, this study has made theoretical contribution as melding with uncertainty factors with capital budgeting practices, geographical contribution as investigated the prevalent capital budgeting practices in Sri Lankan emerging market and parametric contributions as identified firm characteristics and uncertainty factors on the choice of capital budgeting practices and consequence influence on firm performances. The directions for future research are clearly discussed. In a nutshell, beyond its valuable contribution, this study serves as a springboard for future research.

Capital budgeting is one of the most crucial organisational tools for executing operational, business and corporate strategy. Manufacturing companies derive their profits from fixed assets that also deteriorate over time. This requires them to invest large amounts of capital to both maintain and expand their asset base. A number of studies both historic and recent produce conflicting results on the relationship between capital budgeting practices and financial performance.This study sets out to identify the current capital budgeting practices in the manufacturing/capital intensive companies operating in the South African environment, and determine the relationship between the financial performance and capital budgeting practices. The implications of the type of capital expenditure (i.e. maintenance and expansionary) are also discussed.The study was completed using primary and secondary data. Primary data consisted of capital budgeting practices data in some of the private and state-owned enterprises that was source using a survey questionnaire. The secondary data was sourced from financial statements on the McGregor BFA® database.The major finding of this research study was that, given the sufficient sub-sector analysis, there is a positive relationship between capital budgeting practices and financial performance. There were no specific individual practices that yielded significantly returns.
Dissertation (MBA)--University of Pretoria, 2012.
Gordon Institute of Business Science (GIBS)
unrestricted

This thesis analyzes the impact of capital budget on capital spending in the U.S. states. The analysis is based on the James Poterba's 1995 study of the impact of a capital budget on capital spending using 1962 U.S. state-level data. I first replicate Poterba's model using the 1992-1996 data set that I had constructed for this study. I then extend Poterba's model to include a set of variables that allows exploration of the specific effects of the regulatory environment on spending outcomes in each state. These are mainly categorical variables that classify states in accordance with their definition of capital expenditure, organization of capital planning process, project selection and cost estimating techniques and capital financing practices. These were constructed using the data of the 1997 NASBO survey after reviewing the suggestions of practitioners and policy makers, as well as those engaged in research in this field. The introduction of a set of budget rule/budget composition variables into the analysis is an important contribution of this study. I also introduce additional control variables such as those controlling for the age of infrastructure. This study supports the claim that government spending is determined by a host of causal factors that can be grouped into four broad categories, (1) demographic-economic factors, representing both demand for public capital and source of its financing, (2) political decision-making factors that reflect electorate/party in power preferences for spending, (3) capital stock variables that relate to the age of infrastructure and control for spending culture in a state, and (4) budget composition/spending rules. The main finding of this study is the confirmation of Poterba's finding with respect to the positive effect of capital budget on capital spending using a recent data set and longer time frame of analysis. Another major contribution of this study is a statistically significant effect of sixteen spending rule/ budget composition variables. The results of this study support the basic premise found in the literature that budget process affects capital spending.
Master of Public and International Affairs

The main focus of this study is the analysis of the capital budgeting practices and techniques implemented by companies listed on the Alternative Exchange (Alt X) of the Johannesburg Securities Exchange (JSE). Dayananda, Iron, Harrison, Herbohn and Rowland (2002) explain that capital budgeting is the process through which companies assess various sizeable investments, both tangible and intangible, to determine the most viable investment projects for the company. Dayananda et al. (2002) further explain that viable investment projects are ventures that correspond with the company’s objective of maximising shareholder wealth. Therefore, the capital budgeting process used by a company is very influential to its long-term sustainability. Ryan and Ryan (2002) add that an effective capital budgeting process employs appropriate measures and accurate techniques that ensure the company invests only in the most lucrative proposed projects. This study commences by presenting a general introduction into the research conducted, offering background insight that explains the need for a study of this nature. The research problem that was identified is discussed, followed by the purpose statement of the study and a definition of all the research objectives that guide the study. Furthermore, the academic value and intended contribution of the study as well as its practical benefits are disclosed. The introductory chapter also consists of the delimitations of the study and the key concepts covered in this study. In order to provide a complete analysis of the capital budgeting practices employed by the companies listed on the Alt X, a comprehensive literature review was conducted. This highlighted the importance of capital budgeting as well as the capital budgeting behaviour of large firms in South Africa and internationally. What emerged from this research was that the capital budgeting practices and techniques implemented by large companies generally tend to align with the recommendations of financial theory which advocates the use of discounted cash flow techniques and a discount rate that accounts for all sources of funds available to the company. The literature review also assesses studies conducted on the capital budgeting practices of small and medium sized enterprises (SMEs), the category under which Alt X listed companies fall. Findings from those studies reveal that SMEs traditionally employ inferior capital budgeting techniques in comparison to their - iii - larger counterparts and use no formal procedures to calculate an acceptable rate of return required from proposed investment projects. The theoretical background gained from the literature review is complimented by an empirical analysis which investigates the actual capital budgeting behaviour of the SMEs listed on the Alt X. Companies included in the study were from all seven sectors represented on the Alt X and selection was limited only to those with an active primary listing on this board. A web-based survey comprising of 28 questions was formulated using Survey Monkey Software to collect and analyse responses. The survey was divided into sections which included questions about respondent demographics, company profiles, capital budgeting practices implemented, capital rationing and the use of discount rates. The survey remained active for a period of eight weeks to allow sufficient time for all respondents invited to participate. A total of 15 responses were obtained from this process when the survey was closed to further responses. The research design, methodology and techniques that guided this study are also disclosed in this dissertation. The final part of this dissertation contains research findings obtained from analysing the primary data gathered through the survey. These findings are analysed and interpreted in isolation, by relating them to findings from comparable studies of the same population as well as to similar studies conducted both locally and internationally. Finally, this dissertation concludes by summarising all research findings derived from the literature review and the empirical study. It also presents recommendations and areas for further study that could be of academic and practical value to the field of finance.
Dissertation (LLM)--University of Pretoria, 2012.
gm2014
Financial Management
unrestricted

This thesis disentangles two elements from the complex interdependent suite of key drivers of firm sophistication in capital-budgeting. Specifically, the relative sophistication of a firm (i.e. its nature) and the development level of the nation in which a firm is embedded (i.e. the nurture experienced by the firm). This research should enhance the development focus and process of nations (e.g., to what degree should national development be about raising the ability of individual firms or will raising national development act as a rising tide [that] raises all boats). The comparative data used in this study comes from 150 Australian (ASX200-index-listed) firms and 150 Sri Lankan (Colombo-stock-exchange-listed firms). The research questions are answered via a quantitative research design that uses primary and secondary data. The response rate to the questionnaire survey of firms was, 45 and 73 completed questionnaires from, respectively, Australia and Sri Lanka (an effective response rate of, respectively, 31.5 and 48.7 percent). Secondary data for 2003-12 are obtained from the ASX, CSE’s and SIRCA databases and are used to calculate return on assets, return on equity, Tobin Q, and earnings per share for the sampled firms. It was found that Australian firms tend to rely heavily on sophisticated capital-budgeting practices, but Sri Lankan relatively small firms prefer simple analysis methods and the larger firms tend to be as adept at sophisticated capital budgeting as their Australian counterparts. The choice of whether to use more sophisticated practices or simpler alternatives varies with a firm’s attributes as well as the level of economic and financial market development in its environment. Also, Australian firms tend to use capital-budget models with good-to-strong predictive power (except for ROE) and Sri Lankan firms tend to use capital-budget models with fair-to-poor predictive power. Further, the analysis of Australian firms tends to yield stronger and more statistically-significant results, than those generated by Sri Lankan firms.
Doctor of Philosophy

The purpose of this exploratory study in school finance was to examine the relationship between transferred capital funds and budgeting practices for select public school districts in Arizona. Three major research questions were derived to examine public school fiscal management relative to budgeting efficiency, lapsing and depletion funds. The three research questions are as follows: (1) What variables can identify and are likely to maximally contribute to school districts' budget expenditures falling within a plus/minus 2% range of the adopted budget? (2) What factors would be maximally associated with school districts having either a credit or deficit ending fund balance in the general operations budget? (3) What variables are likely to maximally contribute to school districts budgeting practices leading to increased or decreased capital levy fund balance? A systematic stratified sample of 31 school districts constituted the study group. Discriminant Function Analysis was used in the statistical treatment of 11 discriminant variables for six budget classifications. Each hypothesis was rejected at the .01 level of significance. Capital Transfer Funds indicated maximum contribution in differentiating school budget groups which were within the plus/minus 2% range of the adopted budget. For the second research question and hypothesis, Revenue, in linear-combination with Beginning Fund Balance and expenditure, evidenced maximum ability to differentiate the credit fund balance. Capital Transfer Funds added minimal ability to discriminate budget groups. For the third hypothesis, Revenues, Expenditures, and Capital Transfer Monies indicated high ability to discriminate budget groups. Capital Transfer Monies, however, was statistically spurious.

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The use of financial mathematics in project management usually is confined to preproject activities, being part of technical and economic feasibility atudy. After the start of the implementation of the project, it was found that the cost management is accomplished without further considers that a monetary unit does not have the same financial value on different dates. The existing literature on the project cost management does not address the issue. With this, is not established a direct relationship between the duration and costs of the Project, which is not true. A delay in any delivery of the project may not only reflect a negative result, it could mean a financial gain to the Project as a whole, at the same time that advances in deliveries may not always reflect only a positive result, it may adversely affect the financial result of the Project. This paper proposes a methodology the complement the traditional project cost management, integrated with capital budgeting practices in order to provide information that give support to decision making aimed at maximizing the return on investment
O uso da matemática financeira em gerenciamento de projetos costuma ficar circunscrito a atividades de pré-projeto, sendo parte integrante do EVTE (Estudo de Viabilidade Técnico-Econômica). Após o início da implantação do projeto, foi constatado que o gerenciamento de custos é realizado sem mais considerar que uma unidade monetária não tem o mesmo valor financeiro em datas diferentes. A literatura existente sobre o gerenciamento de custos em projeto não aborda o assunto. Com isso, não é estabelecida uma relação direta entre os prazos e os custos do Projeto, o que não é verdade. Um atraso em alguma entrega do Projeto pode não refletir apenas um resultado negativo, podendo significar um ganho financeiro ao Projeto como um todo, ao mesmo tempo em que antecipações em entregas nem sempre podem refletir apenas um resultado positivo, podendo causar efeitos negativos no resultado financeiro do Projeto. Esta dissertação vem propor uma metodologia complementar ao gerenciamento tradicional de custos de projetos, integrada às técnicas de análise de investimento, de forma a fornecer informações que deem suporte para a tomada de decisão visando a maximização do retorno do investimento

碩士
開南大學
會計學系
103
This study focuses on the capital budget practices in military hospitals, and capital budget allows managers to perform cost effectiveness analysis regarding long term investment plans. Due to the policies of some hospitals and health centers, some analysis in maintaining financial safety can be used to assist organizations to accomplish their goals. This study applies Claudia Kocher’s study in 2007 to further the exploration of relationships between capital budget practices in Taiwanese military hospitals and key hospital characteristics, i.e. quality of medical management, level of medical services, scale of hospital organization, and integrated hospital systems. Through literature review and empirical analysis, this study concludes that when hospitals evaluate long-term capital budget policies, they could apply complex quantized evaluation methods such as net present value method and internal rate of return. Also, when hospitals perform capital budget policy analysis, they need to consider the adjustment of risk parameters when they use the aforementioned complex quantized evaluation methods. Based on our research conclusion, we recommend the following: hospitals need to consider hospital characteristics when they are using the complex quantized evaluation methods to effectively perform capital budget policy analysis. When hospitals adopt integrated business models, they need to adopt complex quantized evaluation methods to perform capital budget policy analysis, and they need to establish an experienced financial management team to be in charge of the hospitals’ long-term investment plans.

Discounted cash flow (DCF) techniques for capital investment appraisal perform very crucial and important roles that relate to issues ranging from financial to technical, policy and socio-economic environments. Analyses need to be carried out when an organization undertakes capital expenditure on projects and programs. Capital budgets coordinate the development of the organization's long-term capital expenditure projections based on its long-term strategic plans. This dissertation is a result of a descriptive study conducted in the Iringa diocese of the Evangelical Lutheran Church in Tanzania located in Iringa district. The purposes of this study were the following: > To undertake descriptive research to understand the practice of DCF capital· budgeting by key heads of programs and projects of the ELCT Iringa diocese. >To identify key problem areas pertaining to capital budgeting that led to the deterioration of finances in the diocese of Iringa. >To provide recommendations on the alleviation of those identified problems. The study used various forms of data including, the ELCT statistical reports, financial guidelines, a library literature review and a long questionnaire that was distributed to the heads of the particular program/project. The study established the following: > The diocese of Iringa has strategic plans some of which extend to a period of three years. > The heads of programs do not have the necessary skills to pursue DCF Capital budgeting techniques for cash flows estimates falling within the estimated time frame. > The available guidelines issued by the ELCT head office that are currently used do not include the discounting rates and the time value of money when analyzing and evaluating projects and programs. > Since 1997 there has been a decrease in the income that ELCT Iringa diocese is receiving. > There is a need for ELCT Iringa to concentrate more on public relations exercises to attract key donors who could support the running of its programs and projects. In order to reduce the degree of vulnerability and improve her financial viability, it is recommended that ELCT Iringa diocese employ DCF capital budgeting techniques by developing new and better guidelines for capital budgets. Program and project heads also need to be trained in the use of newly developed guidelines. The ELCT Iringa diocese is also advised to improve its handling of finances in order to inspire confidence from its donors.
Thesis (MBA)-University of Natal, 2003.
German Ecumenical Agency.

Research Doctorate - Doctor of Philosophy (PhD)
The purpose of this study is to explore whether adoption of Management Accounting Practices (MAPs) contributes in developing Intellectual Capital (IC) and creating value in Iraqi companies. The findings reveal many of the problems experienced by Iraqi organisations in managing, establishing and developing of intellectual capital. The findings also present many themes that support the adoption of the Management Accounting Practices in solving these problems as well as themes that agree with the philosophy of the Management Accounting Practices in management of intellectual capital. The study revealed that Management Accounting Practices namely Strategy Map (SM), Beyond Budgeting (BB) and Balanced Scorecard (BSC) are relevant in various activities of intellectual capital management such as establishing, developing, planning, controlling, measuring and assessing performance of intellectual capital. The findings of the study reveal that the Real Option Value (ROV) approach is not relevant for all organisations except accounting and auditing firms and pharmaceutical firm. The findings also reveal that these organisations need to adopt a new technique to help them in making the right investment decisions in intellectual capital. This study highlights the need for more research to be done to find a suitable technique for investment decisions in intellectual capital in organizations that believe that real option value is not relevant for them. The findings show that 95% of participants think that Iraqi accountants are unable to apply MAPs in Intellectual Capital Management (ICM). This percentage is a significant indicator that warrants another in-depth study to explore the causes of this challenge and to suggest the suitable solutions for it. This study examines the contribution of MAPs in supporting, establishing and developing intellectual capital that is lacking in the literature. It also examines the main problem that has not been studied in the Iraqi economy, which is whether the management and development of IC will create new sources of value in Iraq to replace its dependence on oil as the main source of value for the country.