Tag Archives: Investment Decision

by | May 17, 2013

A Study on Responsible Investment

A Study about Responsible Investment

The Responsible Investment (RI) industry is a continually growing and changing field that encompasses institutional investors, asset managers and financial service providers. Since the launch of the UN Principles for Responsible Investment (PRI) in 2006, a number of innovations, initiatives and events have moved the industry significantly forward. The Principles now represent more than 800 signatories and over $20 trillion in assets under management.

Case Study on Responsible Investment

The RI field has made progress on many fronts: tools for accessing information about environmental, social and corporate governance (ESG) issues are increasingly available, and publicly available data around corporate social responsibility (CSR) and sustainability practices is continually expanding; institutional investment strategies focusing on ESG-themed investments or integrating ESG factors into the investment decision-making process are common across many traditional and alternative asset lasses; and, finally, research into the relationship between financial performance and ESG factors, both academic and applied, continues to improve in quantity and quality. Keep reading…

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by | May 4, 2013

A Study of Escalating Commitment to a Chosen Course of Action

A Study about Escalating Commitment to a Chosen Course of Action

It is commonly expected that individuals will reverse decisions or change behaviors which result in negative consequences. Yet, within investment decision contexts, negative consequences may actually cause decision makers to increase the commitment of resources and undergo the risk of further negative consequences. The research presented here examined this process of escalating commitment through the simulation of a business investment decision. Specifically, 240 business school students participated in a role-playing exercise in which personal responsibility and decision consequences were the manipulated independent variables. Results showed that persons committed the greatest amount of resources to a previously chosen course of action when they were personally responsible for negative consequences.

Case Study on Escalating Commitment

Intuitively, one would expect individuals to reverse decisions or to change behaviors which result in negative consequences. Yet, there seem to be many important instances in which persons do not respond as expected to the reward/cost contingencies of their environments. Specifically, when a person’s behavior leads to negative consequences we may find that the individual will, instead of changing his behavior, cognitively distort the negative consequences to more positively valenced outcomes (see, e.g., Abelson et al. 1968; Aronson, 1966; Staw, 1976; Weick, 1966). The phenomenon underlying this biasing of behavioral outcomes is often said to be a self-justification process in which individuals seek to rationalize their previous behavior or psychologically defend themselves against adverse consequences. Keep reading…

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by | May 3, 2013

A Study of Escalating Commitment to a Chosen Course of Action

A Study about Escalating Commitment to a Chosen Course of Action

It is commonly expected that individuals will reverse decisions or change behaviors which result in negative consequences. Yet, within investment decision contexts, negative consequences may actually cause decision makers to increase the commitment of resources and undergo the risk of further negative conse quences. The research presented here examined this process of escalating commitment through the simulation of a business investment decision. Specifically, 240 business school students participated in a role-playing exercise in which personal responsibility and decision consequences were the manipulated independent variables. Results showed that persons committed the greatest amount of resources to a previously chosen course of action when they were personally responsible for negative consequences.

Case Study on Escalating Commitment

Intuitively, one would expect individuals to reverse decisions or to change behaviors which result in negative consequences. Yet, there seem to be many important instances in which persons do not respond as expected to the reward/cost contingencies of their environments. Specifically, when a person’s behavior leads to negative consequences we may find that the individual will, instead of changing his behavior, cognitively distort the negative consequences to more positively valenced outcomes (see, e.g., Abelson et al. 1968; Aronson, 1966; Staw, 1976; Weick, 1966). The phenomenon underlying this biasing of behavioral outcomes is often said to be a self-justification process in which individuals seek to rationalize their previous behavior or psychologically defend themselves against adverse consequences.  keep reading…

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by | March 23, 2013

A Study on Real Option Approach to R&D Project Valuation

A Study about Real Option Approach to R&D Project Valuation

Abstract: The thesis illustrates that traditional NPV and decision tree are not appropriate to value the R&D project, due to the high uncertainty and multi-phase characters. The thesis reviews the applicability of real option methods in this field and explains the real options pricing theory. Additionally, we construct a hypothetical case of new drug development and show the failure of Expected NPV application in capturing managerial flexibility. Based on real options theory, the paper also advances a general real option analysis framework of R&D investment.



Case Study on R&D Project Valuation

Introduction: With the intensity of market competition and the fast development of new technology, corporate management environment constantly varies, which requires corporate mangers to treat the risk and uncertainty timely and dynamically, chooses investment direction correctly, controls investment scale rationally, adjusts investment style flexibly and changes investment decision constantly. These requirements adequately represent importance of managerial flexibility. Nevertheless, the net present value rule and other discounted cash flow techniques for capital budgeting favor short term projects in relatively certain markets over longer and relatively uncertain projects.

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by | March 23, 2013

A Study on Comparing Net Present Value and Internal Rate of Return

Study about Comparing Net Present Value and Internal Rate of Return

Introduction: To this point neither of the two discounted cash flow procedures for evaluating an investment is obviously incorrect. In many situations, the internal rate of return (IRR) procedure will lead to the same decision as the net present value (NPV) procedure, but there are also times when the IRR may lead to different decisions from those obtained by using the net present value procedure. When the two methods lead to different decisions, the net present value method tends to give better decisions. It is sometimes possible to use the IRR method in such a way that it gives the same results as the NPV method. For this to occur, it is necessary that the rate of discount at which it is appropriate to discount future cash proceeds be the same for all future years.



Case Study on Net Present Value

Accept or Reject Decisions: Frequently, the investment decision to be made is whether to accept or reject a project where the cash flows of the project do not affect the cash flows of other projects. We speak of this type of investment as being an independent investment. With the IRR procedure, the recommendation with conventional cash flows is to accept an independent investment if its IRR is greater than some minimum acceptable rate of discount. If the cash flow corresponding to the investment consists of one or more periods of cash outlays followed only by periods of cash proceeds, this method will give the same accept or reject decisions as the NPV method, using the same discount rate.

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by | February 23, 2013

Case Study on Capital Budgeting In Hospitals

Case Study on Capital Budgeting In Hospitals this paper we present a zero-one goal programming model for capital budgeting in hospitals. Capital budgeting is a major task in hospitals because of rising medical costs, due to funds limitations, competition environment among the hospitals. So, the Administrator must take a proper decision about the capital budgeting by using proper tools. Among the many proposed methods of multi criteria decision methods, zero-one goal programming is powerful and widely used tool. The purpose of this paper is to present a model capable of dealing with the problems of multiple conflicting goals, indivisibility of projects, and capital rationing which characterize the unique decision environment of the hospital administrator.



Case Study on Capital Budgeting In Hospitals

Introduction: In today’s highly complicated, technological and competitive health care arena, the public outcry is for administrators, medical staff, and other health care professionals to provide high quality services at lower cost. Health care administrators must therefore find ways to get excellent results from more limited resources. The major problems facing by the hospital administrators are resources allocation and capital budgeting. Capital budgeting is the investment decision-making as to whether a project is worth undertaking or not. It is a big task in hospitals because of rising medical costs, due to funds limitations, competition environment among the hospitals. So, the administrator must take a proper decision about the capital budgeting..
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by | December 20, 2012

Case Study in Shin Kong Financial Holding

The Shin Kong group has been cultivating markets, accumulating experiences, and building a reputation for excellence. As part of its drive to maintain a market-leading position, SKFH needed to extend risk management across its multiple divisions in order to enhance the investment decision making process and mitigate associated risk. SKFH senior management intended to understand more about the exposure for the group level as well as the individual entities. Click here to read more…

Case Study in Shin Kong Financial Holding

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by | June 3, 2010

Capital Budgeting and Economic Development in the Third World: The Case of Nigeria

Poor and Unrealistic capital budgeting has long been the bane of socio-economic development in Africa and of course, Nigeria. The issue of capital, investment and how it was undertaken in the capital budgeting process thus constitutes a major concern of this paper. Even in the midst of vast economic and resources cum endowment, African countries are not only technologically backward but wallow in neckdeep poverty and indebtedness.


In the bid to resolve this nagging problem, this paper looked at the form and approach of the Nigeria government to capital budgeting. It tried to unravel the causes of project abandonment, capital disappearance and inhibition placed on capital budgeting as the country related to other countries outside her borders (particularly in the Western world). The paper adopted a basic research approach whereby it collected primary data from questionnaires administered on 94 firms primarily and they were complemented with vast secondary data extracted from Nigerian stock exchange fact books from 1980-1999.


The analysed data were presented in tables, percentages and were critically discussed. Basically, the study found out that most firms used one form of the criteria or another for selecting optimum investment. However, the study revealed that the most common method is the payback period. The study also revealed that dividends and taxation payouts as well as shareholders’ funds and share capital strongly influenced public companies growth performance when juxtaposed with retained earnings and credit investment.


Moreover, net cash flow on investment is found to be a strong determinant of performance since higher income dictates better investment returns and vice-versa.The paper concluded that capital budgeting decision is an unnegotiable investment decision making strategy that must be taken very seriously.


Given the fact that only private sectors made use of various methods of project valuation, which accounts for the reason why the little development visible in Nigeria are from the private sectors, the study therefore pushes that the government should embrace capital budgeting if it is to witness appreciable economic development.
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