The Utilization of Quantitative and Qualitative Information in Groups' Capital Investment Decisions

2014 ◽  
Vol 27 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Nicole P. Ang ◽  
Ken T. Trotman
Keyword(s):  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Quantitative Information ◽  
Data Availability ◽  
Strategic Decisions ◽  
Qualitative Information ◽  
Accounting Systems ◽  
Unique Information ◽  
Present Information

ABSTRACT Organizations frequently use interactive groups to make strategic decisions, aiming to capitalize on individual members' unique knowledge. However, research shows that groups focus on information that members have in common, not unique information, resulting in suboptimal outcomes. Given that accounting systems can present information in various forms, we experimentally examine whether quantitative information results in greater information sharing and use than qualitative information. We take advantage of a rich dataset created by videoing groups making a capital investment decision. Consistent with prior research, we find that groups prefer common to unique information, regardless of whether it is quantitative or qualitative. However, individuals use quantitative information more than qualitative information before group interaction, and make more references to it during discussion. Added insights from the videos include identifying what determines greater use of quantitative cues, the importance of the numbers attached to cues, and how successful groups use quantitative cues. Data Availability: Please contact the authors.

High-Quality Information Technology and Capital Investment Decisions

2019 ◽  
Vol 34 (3) ◽  
pp. 1-29
Author(s):  
John L. Abernathy ◽  
Brooke Beyer ◽  
Jimmy F. Downes ◽  
Eric T. Rapley
Keyword(s):  
Information Technology ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Data Availability ◽  
Decision Quality ◽  
Quality Information ◽  
Investment Efficiency ◽  
High Quality ◽  
High Quality Information

ABSTRACT We examine the effect of high-quality information technology (IT) on management's capital investment decisions. Evaluating capital investment decisions with contemporary investment efficiency and long-term measures of investment effectiveness, we document a positive relation between high-quality IT and capital investment decision quality. In particular, we find high-quality IT is associated with more optimal levels of investment as well as fewer future fixed asset write-downs. We also disaggregate investment efficiency and find the relation with IT quality holds for investment decisions related to capital expenditures and acquisitions, but not research and development expenditures. Overall, our results suggest managers equipped with better internal information from higher-quality IT are able to make superior capital investment decisions. Our study contributes to the literature by providing evidence of a significant determinant of capital investment decision quality and documenting a specific mechanism that mediates the indirect effect of IT quality on future performance. JEL Classifications: D83; E22; G31; M15; M41. Data Availability: We thank InformationWeek for providing annual rankings that were previously published. All other data are publicly available from regulatory filings; we obtained data from the Compustat, Execucomp, and I/B/E/S databases.

scholarly journals PENGARUH INVESTASI DAN PENDANAAN TERHADAP BIAYA MODAL PERUSAHAAN DAN FINANCIAL DISTRESS PERUSAHAAN TAMBANG BATUBARA YANG GO PUBLIC DI INDONESIA

2018 ◽  
Vol 2 (1) ◽  
pp. 81
Author(s):  
LCA Robin Jonathan
Keyword(s):  
Financial Distress ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Financial Statement ◽  
Path Coefficient ◽  
Insignificant Effect ◽  
Path Diagram ◽  
Capital Funding ◽  
The Cost

The purpose of this study to analize and determine the effect of investment and funding to the cost of company capital and financial distress. The development of mining and mining service comnaies that go public today reached 42 companies in Indonesia in the period 2013-2015, including examined 23 financial statement of coal mining companies at the same time.Using regression path analysis methode to test the magnitude of the effect indicated by the path coefficient on each path diagram of the causal relationship between investment decision and funding decision as exogenous variable to cost of campany capital and financial distress as endogenous variable.The results showed that investment decisions and funding decisions significantly affect the cost of company capital; Investment decisions have a significant and dominant effect on financial distress and have a negative and insignificant effect on financial distress through the cost of company capital; Funding decisions have a negative and insignificant effect on financial distress and have a significant effect on financial distress through the cost of company capital; The cost of company capital has a negative and insignificant effect on financial distress.

Macroeconomic Uncertainty and Quantitative vs. Qualitative Inputs to Analyst Risk Forecasts

2020 ◽  
Author(s):  
Khrystyna Bochkay ◽  
Peter Joos
Keyword(s):  
Investment Decision ◽  
Quantitative Information ◽  
Investment Risk ◽  
Firm Risk ◽  
Qualitative Information ◽  
Macroeconomic Conditions ◽  
Macroeconomic Uncertainty ◽  
Investment Decision Making ◽  
Risk Forecasting ◽  
Disclosure Tone

Risk forecasting is crucial for informed investment decision-making. Moreover, the salience of investment risk increases during economically uncertain times. In this paper, we study how sell-side analysts form expectations of firm risk, under different macroeconomic conditions (low versus high uncertainty) and by distinguishing between quantitative and qualitative information inputs. We find that analysts jointly consider quantitative and qualitative information but that their reliance on qualitative information - in particular, disclosure tone - increases when macroeconomic uncertainty is high. We also find that analysts mostly rely on disclosure tone when it contradicts quantitative information. These findings highlight how narrative disclosures can provide context for quantitative information. Finally, we find that analysts' specific use of quantitative/qualitative information improves their forecasts as predictors of firm risk. Together, our results illuminate analysts' risk forecasting process - what information they use and how.

scholarly journals The Role of Tax Incentives in Capital Investment and R&D Decisions

2010 ◽  
Vol 28 (2) ◽  
pp. 241-256 ◽  
Author(s):  
Francis Chittenden ◽  
Mohsen Derregia
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Tax Incentives ◽  
Business Owners ◽  
Business Plans ◽  
Investment Decision Making ◽  
Potential Benefits ◽  
The Impact

In this paper we present the results from a study of the role that tax incentives play in business owners' decisions on capital investment and research and development (R&D) expenditure. We use semistructured interviews with fifteen business owners and directors and five financial advisers to establish the extent to which tax incentives are considered in capital and R&D investment decisions, and to identify obstacles that might prevent UK capital allowances and R&D tax policies from achieving their goals. First, we investigate whether incentives are sufficient to encourage investment and whether the costs of accessing the incentives faced by similar firms limit the potential benefits of the policy. Second, we explore the stage in the process of investment decision making at which tax issues are considered and the degree of importance attached to tax incentives. For example, is the tax treatment integral to the decision-making process or only a ‘final consideration’ at the end? Third, we investigate the impact of uncertainty on the tax incentives, since this can be an important aspect of investment decisions, and may diminish the effectiveness of policy. It is not clear whether the incentives offered are effective in generating additional investment and in helping financially constrained firms. Under uncertainty the incentives need to be substantial to influence the decision to invest. Effective policy should assist firms who would otherwise struggle to realise their business plans.

scholarly journals A Methodology for Improving Strategic Decisions in Social Systems with a Lack of Information

Organizacija ◽  
2010 ◽  
Vol 43 (3) ◽  
pp. 102-112
Author(s):  
Carlos Verna ◽  
Andrej Škraba
Keyword(s):  
Social Systems ◽  
Quantitative Information ◽  
Decision Makers ◽  
Formal Models ◽  
Strategic Decisions ◽  
Santa Cruz ◽  
Qualitative Information ◽  
Qualitative And Quantitative ◽  
Lack Of Information ◽  
The City

A Methodology for Improving Strategic Decisions in Social Systems with a Lack of InformationThe design of strategies for social systems requires the use of qualitative information owing to the fact that quantitative information can be insufficient to solve the problems involved. The information that the specialists and the decision makers obtain is often incomplete and unreliable. Nevertheless, leaders have to make strategic decisions despite these deficiencies which should be based on the formal models (Kljajić et al. 2000; Škraba et al, 2003; Škraba et al 2007).This paper describes a methodology elaborated to design the strategy of the city of Santa Cruz (on the Canary Islands). It has two main sections: the elaboration of a qualitative model and the use of System Dynamics. We combine them in a way that allows mixing qualitative and quantitative information to achieve a better understanding of the structure of the region, to know the tendencies of the present scenario and to estimate of the effects of alternative strategic decisions. We have obtained these results working with scarce quantitative information. This methodology may be applied to any social systems with similar characteristics.

The Timing of Asset Purchases to Achieve Earnings Thresholds

2015 ◽  
Vol 28 (1) ◽  
pp. 81-106 ◽  
Author(s):  
Thomas G. Canace ◽  
Leigh Salzsieder
Keyword(s):  
Capital Investment ◽  
Capital Expenditure ◽  
Investment Decisions ◽  
Capital Intensity ◽  
Data Availability ◽  
Capital Expenditures ◽  
Cross Sectional ◽  
Quarterly Earnings ◽  
Asset Purchases ◽  
Earnings Thresholds

ABSTRACT This study examines whether managers use capital investment decisions, and the resulting depreciation expense, to achieve quarterly earnings thresholds. We also address whether these actions merely facilitate short-term earnings management or whether firms may trade off investment decisions to deliver earnings. We posit that managers may view capital expenditures as an alternative for earnings considerations because of the process for capital expenditure decision making and the accounting for these investments. Our findings suggest that managers use discretion over capital expenditures to achieve two well-documented earnings thresholds, but that these decisions largely reverse in the following quarter. We document the deferral of capital expenditures to avoid depreciation for industries where the median useful life averages approximately seven years. Cross-sectional tests also suggest that the use of capital expenditures for achieving thresholds varies depending upon the firm's capital intensity, remaining book value of assets, operating cash flow constraints, CEO horizon, and fiscal quarter. Data Availability: Data are available from the authors upon request.

scholarly journals Information Environment and the Investment Decisions of Multinational Corporations

2013 ◽  
Vol 89 (2) ◽  
pp. 759-790 ◽  
Author(s):  
Nemit Shroff ◽  
Rodrigo S. Verdi ◽  
Gwen Yu
Keyword(s):  
Multinational Corporations ◽  
Investment Decision ◽  
Investment Decisions ◽  
Information Environment ◽  
Data Availability ◽  
External Information ◽  
Foreign Subsidiaries ◽  
Information Frictions ◽  
Cross Border ◽  
Investment Decision Making

ABSTRACT This paper examines how the external information environment in which foreign subsidiaries operate affects the investment decisions of multinational corporations (MNCs). We hypothesize and find that the investment decisions of foreign subsidiaries in country-industries with more transparent information environments are more responsive to local growth opportunities than are those of foreign subsidiaries in country-industries with less transparent information environments. Further, this effect is larger when (1) there are greater cross-border frictions between the parent and subsidiary, and (2) the parents are relatively more involved in their subsidiaries' investment decision-making process. Our results suggest that the external information environment helps mitigate the agency problems that arise when firms expand their operations across borders. This paper contributes to the literature by showing that the external information environment helps MNCs mitigate information frictions within the firm. JEL Classifications: D83; G31; M41. Data Availability: Data are available from public sources identified in the paper.

Does the Communication of Causal Linkages Improve Employee Effort Allocations and Firm Performance? An Experimental Investigation

2012 ◽  
Vol 24 (1) ◽  
pp. 77-102 ◽  
Author(s):  
Anne M. Farrell ◽  
Kathryn Kadous ◽  
Kristy L. Towry
Keyword(s):  
Firm Performance ◽  
Performance Measures ◽  
Quantitative Information ◽  
Data Availability ◽  
Production Task ◽  
Qualitative Information ◽  
Employee Effort ◽  
And Performance ◽  
Benefits And Costs ◽  
Important Evidence

ABSTRACT We use a multi-period production task to experimentally examine whether communication about causal linkages between actions today and performance tomorrow improves employee effort allocations and firm performance. We base our predictions on melioration theory, which anticipates that employees will allocate effort as though causal linkages were not there. We find that, absent communication about causal linkages, one-third of participants allocate effort without regard to causal linkages. Communicating qualitative information about linkages significantly improves effort allocations and performance. Communicating quantitative information about the linkage is no more beneficial than communicating qualitative information. Our results have implications for firms examining the benefits and costs of developing, validating, and quantifying causal linkages between performance measures, and they provide important evidence about how melioration theory can be extended to a rich context. Data Availability: Data used in this study are available from the authors upon request.

scholarly journals Capital investment decisions of small and medium enterprises in Benin-City, Nigeria

2021 ◽  
Vol 10 (3) ◽  
pp. 101-108
Author(s):  
Amadin Victor Idehen
Keyword(s):  
Capital Investment ◽  
Research Method ◽  
Small And Medium Enterprises ◽  
Investment Decision ◽  
Investment Decisions ◽  
Statistical Technique ◽  
Study Data ◽  
Benin City ◽  
The Government ◽  
Medium Enterprises

The study examined the capital investment decision of small and medium enterprises ( SME’s) in Nigeria. The objective of the study is to determine if small and medium enterprises in Nigeria utilize investment techniques. The survey research method was employed to carry out the study. Data were elicited through the use of questionnaires and oral interviews. These data were analyzed and presented using a statistical technique such as tables and percentages. The result revealed that most small and medium enterprises in Nigeria utilized investment techniques in their investment decision. Based on the above findings, it was recommended that SMEs in Nigeria should be encouraged to employ the services of qualified professionals or someone who has knowledge on basic techniques for investment decisions, the government should organize frequent training for SMEs on financial and investment decisions.   

The Effect of Firms' Depreciation Method Choice on Managers' Capital Investment Decisions

2008 ◽  
Vol 83 (2) ◽  
pp. 351-376 ◽  
Author(s):  
Scott B. Jackson
Keyword(s):  
Financial Reporting ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Cash Flows ◽  
Method Choice ◽  
Straight Line ◽  
Replacement Decisions ◽  
Accelerated Depreciation ◽  
Executive Managers

This study examines whether straight-line depreciation, relative to accelerated depreciation, causes non-executive managers to make non-value-maximizing capital investment decisions. To do this, I conduct experiments in which managers must decide whether to continue using an existing asset or invest in a replacement asset. By design, replacing the existing asset yields higher cash flows and managers are aware of this fact. However, if the asset is replaced, then the greater remaining book value under straight-line depreciation relative to accelerated depreciation causes earnings to be lower. Lower earnings and psychological forces may push managers of firms that use straight-line depreciation away from making the economically efficient capital investment decision. The results suggest that managers of firms that use straight-line depreciation are less likely to invest in a replacement asset than are managers of firms that use accelerated depreciation. Further, the results suggest that managers perceive that an asset depreciated using straight-line depreciation has provided less retrospective utility than an asset depreciated using accelerated depreciation. In turn, I find that depreciation method-induced differences in managers' retrospective utility perceptions influence their prospective utility perceptions, which, in turn, influence managers' asset replacement decisions. By theoretically and empirically linking firms' depreciation method choice to managers' capital investment decisions, I provide evidence that a seemingly innocuous choice made for external financial reporting purposes can cause managers to make non-value-maximizing capital investment decisions.

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