Assignment: Capital Budgeting Process Article

Assignment: Capital Budgeting Process Article ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Order custom papers from Nursing Paper Essays writers and be guaranteed of A++ Scores. Assignment: Capital Budgeting Process Article APA FORMAT REQUIRED MUST BE PLAGIARISM FREE- REPORT NEEDED 4 ARTICLES Attached-MUST INCLUDE ALL THE ARTICLES IN REVIEW SHEET Assignment: Capital Budgeting Process Article Reference Article Review Attached for your Reference Pages Required- 3-4 excluding Cover Page and references Topic And Articles Attached (TOPIC-Capital Budgeting/ Budgeting and Planning) GUIDELINE Article Review Sheet Guidelines Research article critiques/reviews are utilized to assist the student in understanding the format of research articles and to better understand the research problem and results of the study/article. Proper APA in-text citation must be used. When critiquing/reviewing the article, please answer the following questions in your own words unless stated otherwise: 1) Title/Abstract : a. State the title of this study. b. Paraphrase the key aspects of the Abstract. 2) Introduction : a. Describe the general area to be studied. b. Identify a more specific problem within the general area of study. c. Describe why the problem is important to study and what is known about the problem. d. State the specific purpose of the study and the research questions. 3) Literature Review : a. List the topics/headings of the Literature Review. b. How many different sources were cited in the Literature Review? c. Briefly summarize the Literature Review. 4) Data Analysis : a. What methodology was used; qualitative, quantitative, mixed? b. Summarize the analysis. 5) Results/Conclusion : a. Did the data analysis prove or disprove the research questions? Describe. b. Summarize the results of the study c. Describe any theoretical or practical consequences of the results. Assignment: Capital Budgeting Process Article d. Describe the limitations of the study. 6) How can the results and conclusions presented in this study be applied to your particular topic? 7) Please provide the reference for this article in proper APA format: article_review_sheet_guidelines_11_.docx review_paper_capital_budgetting_1_1981_hari.pdf review_paper_capital_budgetting_2_2014_j_h.pdf review_paper_capital_budgetting_4_2016_hari.pdf review_paper_planning_and_budg Article Review Sheet Guidelines Research article critiques/reviews are utilized to assist the student in understanding the format of research articles and to better understand the research problem and results of the study/article. Proper APA in-text citation must be used. When critiquing/reviewing the article, please answer the following questions in your own words unless stated otherwise: 1) Title/Abstract: a. State the title of this study. b. Paraphrase the key aspects of the Abstract. 2) Introduction: a. Describe the general area to be studied. b. Identify a more specific problem within the general area of study. c. Describe why the problem is important to study and what is known about the problem. d. State the specific purpose of the study and the research questions. 3) Literature Review: a. List the topics/headings of the Literature Review. b. How many different sources were cited in the Literature Review? c. Briefly summarize the Literature Review. 4) Data Analysis: a. What methodology was used; qualitative, quantitative, mixed? b. Summarize the analysis. 5) Results/Conclusion: a. Did the data analysis prove or disprove the research questions? Describe. b. Summarize the results of the study c. Describe any theoretical or practical consequences of the results. d. Describe the limitations of the study. 6) How can the results and conclusions presented in this study be applied to your particular topic? 7) Please provide the reference for this article in proper APA format: The Perceived Importance of Selected Information Characteristics for Strategic Capital Budgeting Decisions Author(s): David F. Larcker Source: The Accounting Review, Vol. 56, No. 3 (Jul., 1981), pp. 519-538 Published by: American Accounting Association Stable URL: https://www.jstor.org/stable/246913 Accessed: 19-07-2019 16:56 UTC JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected] Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at https://about.jstor.org/terms American Accounting Association is collaborating with JSTOR to digitize, preserve and extend access to The Accounting Review This content downloaded from 208.87.236.201 on Fri, 19 Jul 2019 16:56:24 UTC All use subject to https://about.jstor.org/terms THE ACCOUNTING REVIEW Vol. LVI, Assignment: Capital Budgeting Process Article No. 3 July 1981 The Perceived Importance of Selected Information Characteristics for Strategic Capital Budgeting Decisions David F. Larcker ABSTRACT: This study examines whether executives have similar preferences regarding information which may be used in making strategic capital budgeting decisions. Measures of perceived importance for selected information characteristics were obtained from 53 senior-level executives involved in strategic capital budgeting decisions. The results suggest that (1 ) ‘executives have similar informational preferences, (2) the preferred information characteristics depend upon which stage of the decisionproblem identification, alternative development, or selection-is being considered by the executive, and (3) environmental and organizational structure variables are not associated with an executive’s informational preferences. The potential implications of these results for management accounting system design and for future research are discussed. alities exist in a specific setting by empirically examining the information preferences of senior-level executives involved in strategic capital budgeting INTRODUCTION HE managerial accountant’s task is to design the organization’s internal information system or manage- ment accounting system (MAS) in order to facilitate managerial decision making. However, as noted by Hopwood [1976], limited research has been directed toward this problem and a method for choosing MAS design parameters has not evolved. This lack of progress might be attributed to the fact that prior research has tended to consider only a single decision, a single decision maker, and/or a single organization, and thus has a distinctly idiosyncratic orientation. An alternative approach to the problem is to search for commonalities in the decision processes of executives and to then select MAS design parameters on the basis of those empirically validated commonalities. This paper is an initial attempt to determine whether common- decisions. ‘ ‘ Several researchers [Dearden, 1964, 1966; Davis, 1974; Anthony and Dearden, 1976; and others] suggest that strategic decision making is essentially idiosyncratic, or specific to a decision, decision maker, or organization. However, these characterizations are based upon very limited empirical analysis. This research was completed during my tenure as the 1979-80 Coopers & Lybrand Research Fellow in Accounting. The author wishes to thank Liam Fahey, Lawrence A. Gordon, W. Bruce Johnson, V. Parker Lessig, Robert P. Magee, Lawrence Revsine, Francis D. Tuggle, William Whitely, and one anonymous reviewer for their helpful comments. David F. Larcker is Assistant Professor of Accounting and Information Systems, Northwestern University. Manuscript received September 1979. Revisions received March, July 1980. A accepted October 1980. 519 This content downloaded from 208.87.236.201 on Fri, 19 Jul 2019 16:56:24 UTC All use subject to https://about.jstor.org/terms The Accounting Review, July 1981 520 project for implementation in response to the problem or opportunity. The theoretical linkage between these trol, and strategic planning. Operationalphases of the strategic capital budgeting decision and MAS design has been recontrol decisions involve lower-level cently explored by Gordon et al. [1978]. management and are concerned with They argue that the information requireensuring that specific tasks are carried out in an effective and efficient fashion. ments of senior-level managers involved Management control decisions involve in strategic capital budgeting decisions middle-level management and are conare contingent upon the decision phase cerned with assuring that resources are being addressed. If information requireeffectively and efficiently employed in ments vary with decision phase, then it accomplishing organizational goals. Fimay prove fruitful to alter the MAS so that different types of information are nally, strategic planning or unproprovided at each decision phase. The grammed [Simon, 19651 decision making involves top-level management and fopurpose of the current study is to provide cuses on determining the overall, longa preliminary empirical examination of the conceptual linkages suggested by range goals and policies of the organizaGordon et al. [1978] by determining tion. Thus, contrary to operational and whether managerial preferences associmanagerial control decisions, strategic ated with selected information characdecisions are consequential and long-run teristics vary across decision phase. in nature, are highly complex, involve The existing literature [Gorry and staff and top management, and produce Scott Morton, 1971; Dermer, 1973; policies and precedents for the organizaMatthews, 1976; Ghymn and King, 1976; tion. Gordon and Miller, 1976] suggests that One important aspect of strategic Anthony [1965] suggests that managerial decisions occur at three levels: operational control, management con- planning involves decisions which may information is characterized by at least three underlying dimensions: (1) Focus which refers to the degree to which the budgeting decisions [Mintzberg et al., information is associated with the or1976; Witte, 1972].2 Researchers both in appropriately be classified as capital ganization alone (internal) or the organiaccounting [Gordon et al., 1978] and organizational theory [Mintzberg et al., zation’s environment (external);Assignment: Capital Budgeting Process Article (2) Quantification which refers to whether the 1976; Witte, 1972; Ackerman, 1970; information is expressed in, or derived Downs, 1967; Soelberg, 1967] have argued that one commonality among stra- tegic decisions in general and capital 2 Limiting the analysis to strategic capital budgeting budgeting decisions in particular is that decisions partially controls for “task effects.” That is, strategic decisions concerned with organizational design they are composed of at least three or personnel management may involve very different phases: (1) problem identification, or the tasks, analyses, and informational preferences, as comrealization that a problem or opportunity pared to capital budgeting decisions, such as new product is confronting the organization which development or acquisitions. [see Mintzberg et al., 1976]. By considering only capital budgeting decisions, may require a major capital expenditure; the confounding impact of potential task effects on the (2) alternative development, or the genera-empirical analysis is partially mitigated. There are, however, different types of capital budgeting decisions (e.g., tion of alternative capital projects to solve the identified problem or take advantage of the opportunity; and (3) selection, or the choice of one capital mergers, acquisitions, product line expansion). The potential confounding due to task differences associated with these different capital budgeting decisions is not explicitly controlled and is one limitation of the studv. This content downloaded from 208.87.236.201 on Fri, 19 Jul 2019 16:56:24 UTC All use subject to https://about.jstor.org/terms Larcker 521 from, monetary (financial) or nonmonetary (nonfinancial) measures; and (3) Time horizon which refers to whether the information has a historical (ex post) or future (ex ante) orientation. The perceived importance of internal to external, financial to nonfinancial, and ex post to ex ante information is examined at each of the three strategic capital budgeting decision phases. Child, 1975]. While not exhaustive, this set of variables have been shown to be important for explaining organizational performance, technological innovation, and/or managerial job characteristics. HYPOTHESES Given the exploratory nature of this research, it is difficult to develop compelling arguments in support Qf hypotheAmong the many potentially imporsized relationships between information tant factors influencing managerial decharacteristics and decision phases. The cision processes are the structure of the normative research in decision theory organization and the nature of the bears little relationship to the research organization’s external environment.3 question posed in here, because problem [Simon, 1957; Jurkovich, 1974; Moch, identification is generally ignored, alter1976; Rousseau, 1978]. These continnatives are assumed to be known, and the gency variables may play a crucial role in objective function of the decision maker MAS design [Grinyer and Norburn, is assumed to be known. The extensive 1975; Gordon and Miller, 19765]. The normative literature on capital budgeting perceived importance of external inforalso tends to ignore problem identificamation, for example, may be higher for tion and assumes that the alternatives are executives confronting an external enknown. This literature does, however, vironment which is highly dynamic or provide some insight into the choice unpredictable than for executives conbetween alternative projects at the selecfronting a very stable external environtion phase. The research in organizament. A comprehensive paradigm, howtional behavior provides support for the ever, has not evolved to integrate these existence of decision phases, but provides results so that they are directly applicable neither a rigorous analysis nor empirical to MAS design. Assignment: Capital Budgeting Process Article evidence regarding managerial informaIn ‘order to partially control for thesetion preferences or usage at these phases. contingency influences in the empirical Therefore, the hypothesis development analysis, as well as to provide some relies heavily on the prior conceptual evidence on the association between linkages of Gordon et al. [ 1978 ]. In addicontingency variables and managerial tion, the hypotheses at the selection phase perceptions, several representative ordraw upon the normative research on ganizational and environmental variables capital budgeting. For purposes of illuwere selected for analysis. The organizastration, the following discussion pretional structure variables selected were decentralization, vertical integration, internal technology, and organizational size [Khandwalla, 1974; Child, 1975; Moch, 1976; Rousseau, 1978]. The environmental variables selected were dynamism, hostility, and heterogeneity [Lawrence and Lorsch, 1967; Thompson, 1967; Duncan, 1972; Khandwalla, 1972; I This discussion should not be construed to imply that other influences, such as individual decision maker variables (e.g., cognitive style), are unimportant. Rather, these constructs were simply not considered in this exploratory study. Lyles and Mitroff [1980] have provided some empirical evidence which suggests that individual characteristics exert a minimal impact on organizational problem formulation. Thus, ignoring the individual variables may not be a serious research limitation. This content downloaded from 208.87.236.201 on Fri, 19 Jul 2019 16:56:24 UTC All use subject to https://about.jstor.org/terms The Accounting Review, July 1981 522 sumes that the decision process occurs in a strict sequential order: problem identification, alternative development, and selection.4 Problem Identification Phase the identified problem, the range of alternatives considered might include ignoring the problem, building a new plant, expanding corporate research and development, or seeking a merger or acquisition. The development of alternatives may focus on expected organizational cash flows, firms which are good candidates for acquisition, the ability to obtain debt or equity capital, or the response of competitors and governmental The identification of a capital budgeting problem can arise in many ways. For example, expectations regarding a large organizational cash surplus, changes in governmental regulations, new technoregulatory agencies to each alternative. logical developments by competitors, This information may be (1) both internal changes in product market demographand external since governmental, market, ics, and governmental forecasts may and firm-specific data may be necessary indicate to senior executives that a probto describe an alternative; (2) both finanlem or opportunity is confronting the cial and nonfinancial because a capital organization. This information may be project’s characteristics are likely to in(1) related to changes in the product volve both monetary and nonmonetary market or governmental sectors which attributes; and (3) ex ante, since execuare associated with the organization’s tives are concerned with expected out(external) environment; (2) “soft,” and comes associated with each project. thus expressed in nonmonetary (nonTherefore, three additional research hyfinancial) terms; and/or (3) important potheses are advanced:’ only if the information relates to expected charges (ex ante), and not historical H4: External and internal information outcomes. Therefore, three research hy- potheses are advanced:’ will have equal perceived importance at the development phase. H1: External information will have a higher perceived importance relative to internal information at the problem identification phase. H5: Nonfinancial and financial infor-Assignment: Capital Budgeting Process Article H2: Nonfinancial information will have a higher perceived importance relative to financial information at the problem identifica- H6: Ex ante information will have a tion phase. H3: Ex ante information will have a higher perceived importance relative to ex post information at the problem identification phase. Alternative Development Once the problem is identified, an mation will have equal perceived importance at the development phase. 4 As pointed out by one reviewer and consistent with Mintzberg et al. [19761, the decision phases may not occur in a simple, sequential manner. For example, depending upon the organizational rationality, problem identification may actually follow the selection phase, thus serving as a “rationale” or reconstructed logic provided to justify the selected action. GOviously, the sequence of decision phases is an unresolved empirical issue. The important factor for hypothesis development is that different tasks are being completed at each decision phase and that these tasks demand different types of information. ‘ Each research hypothesis assumes that the influence of the other two information characteristics is controlled. array of alternative capital-project soluFor example, H , assumes that the impacts of quantifica- tions must be developed. Depending on tion and time horizon are held constant. This content downloaded from 208.87.236.201 on Fri, 19 Jul 2019 16:56:24 UTC All use subject to https://about.jstor.org/terms 523 Larcker higher perceived importance relative to ex post information at the spondent had an extensive finance/accounting background and experience in development phase. making strategic capital budgeting decisions. Selection Twenty-three organizations in the ChiOnce a set of feasible alternatives is cago and Kansas City geographical areas identified, the individual projects are were represented in the sample. The evaluated on various dimensions. Noraverage annual sales of the firms included mative capital budgeting research proin the sample ranged from 15 million to vides some insight into the characteristics 1.5 billion dollars, and a wide range of which may be important to this evaluaindustrial classifications were repretion. In particular, information on the sented. All of the organizations were expected financial consequences of each either distinct corporate entities or aualternative may be critical for the imple- tonomous units of larger firms. The vast mentation decision (e.g., years to paymajority of these organizations exceeded back, internal rate of return, cost of their industry averages on a variety of capital, project risk, net present value, financial performance ratios (e.g., return opportunity cost due to capital conon assets, earning per share growth), and straints imposed on other corporate in this sense were successful. projects, and expected impact on earnTasks ings). Consistent with the normative After reading introductory comments research, selection may require informadescribing a strategic capital budgeting tion that is generally characterized as (1) decision, each executive was randomly internal, (2) financial, and (3) ex ante. assigned to one of the three decision Therefore, three final research hypotheses phases. The subject’s first task was to are advanced:’ indicate how important each of eight H7: External information will have a information sets were for analyzing the lower perceived importance relasubject’s assigned phase of the capital tive to internal information at the budgeting decision process.6 The inforselection phase. mation sets constituted a 2 x 2 x 2 design, with all subjects receiving a complete H8: Nonfinancial information will replication. In order to reduce the potenhave a lower perceived importial confounding of responses, the subtance relative to financial inforjects were told to assume that the specific mation at the selection phase. figures or descriptions commonly associH9: Ex ante information will have a ated with the information sets were higher perceived importance relaaccurate and that the information was tive to ex post information at the available in a timely fashion. A represelection phase. sentative case is illustrated in the Appendix. 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