Site Loader

akes each of these assumptions suspect.
It appears that future work in capital
budgeting should consider organizational
behavior theory. The capital budgeting
process entails more than calculating the
cost of capital and project net present val
ues. To understand what businesses do in
capital budgeting, we must better under
stand the dynamics of corporate interac
tions. Efforts in integrating finance
models with decision models (for exam
ple, the models proposed by Emshoff
1978) would be welcome. It is also im
portant that capital budgeting models ap
preciate and incorporate management
behavior toward risk. A fruitful course
may result from the integration of finan
cial and psychometrics models (as sug
gested by Slovic 1972). Agency theory
provides research opportunities in the
area of capital budgeting. Some efforts
have already been made (see Statman
1982 on agency theory and payback
method, and Logue and Tapley 1985 on
agency theory and performance monitor
ing). Incorporating option theory might
also help with the firm’s strategi

Post Author: admin