Computer decision support for capital budgeting: some empirical findings of practice

While recent surveys suggest that capital budgeting systems in business organizations continue to become more formalized and sophisticated, a constraint on the use of sophisticated capital budgeting techniques seems to be the degree of support provided by firms' capital budgeting information systems (CABIS). This paper, based on a survey of 146 large firms, outlines the current status of CABIS and their usage pattern. It was found that although two-thirds of sample firms have specific computer application systems for capital budgeting, most CABIS are relatively unsophisticated and less than adequate in providing the information and decision support capabilities required to use sophisticated capital budgeting techniques effectively. In particular, the barrier and problems encountered in the use of probabilistic risk analysis were explored. Implications of these findings are discussed.

[1]  Fred Niederman,et al.  Information Systems Management Issues for the 1990s , 1991, MIS Q..

[2]  J. MacGregor.  What users think about computer models , 1983 .

[3]  Jinoos Hosseini,et al.  Decision Analysis and Its Application in the Choice Between Two Wildcat Oil Ventures , 1986 .

[4]  E. Reed Doke,et al.  An assessment of information systems taxonomies: time to be re-evaluate? , 1994, J. Inf. Technol..

[5]  Michael R. Vitale,et al.  Creating Competitive Advantage with Interorganizational Information Systems , 1988, MIS Q..

[6]  E. Lawler,et al.  Empowering Service Employees , 1995 .

[7]  Fred Niederman,et al.  DSS theory: A model of constructs and relationships , 1995, Decis. Support Syst..

[8]  Michael J. Earl,et al.  The new and the old of business process redesign , 1994, J. Strateg. Inf. Syst..

[9]  Samuel E. Bodily.  Spreadsheet Modeling as a Stepping Stone , 1986 .

[10]  Thomas Abraham,et al.  Supporting decision support: Where information on DSS is located , 1995, Decis. Support Syst..

[11]  Paul N. Finlay.  Classes of financial planning package—a management perspective , 1985 .

[12]  Richard Pike,et al.  Risk Analysis in Capital Budgeting Contexts Simple or Sophisticated , 1991 .

[13]  Jerry Banks,et al.  Spreadsheet risk analysis using simulation , 1990, Simul..

[14]  G. Zinkhan,et al.  CAPITAL BUDGETING: EMERGING ISSUES AND TRENDS , 1994 .

[15]  N. Venkatraman,et al.  Beyond business process redesign: redefining Baxter's business network. , 1992, Sloan management review.

[16]  J. C. Higgins,et al.  The Microcomputer as a Tool in Financial Planning and Control: Some Survey Results , 1984 .

[17]  Susan F. Haka,et al.  CAPITAL BUDGETING TECHNIQUES AND FIRM SPECIFIC CONTINGENCIES: A CORRELATIONAL ANALYSIS. , 1987 .

[18]  David J. Smith.  Incorporating Risk into Capital Budgeting Decisions Using Simulation , 1994 .

[19]  Michael V. Mannino,et al.  Tools for building the human-computer interface of a decision support system , 1995, Decis. Support Syst..

[20]  Peter G. W. Keen.  Adaptive design for decision support systems , 1980 .

[21]  Hugh J. Watson,et al.  Using EIS to respond to dynamic business conditions , 1995, Decis. Support Syst..

[22]  Pamela K. Coats,et al.  Coping With Business Risk Through Probabilistic Financial Statements , 1982 .

[23]  Dean Uyeno.  Monte Carlo simulation on microcomputers , 1992, Simul..

[24]  Peter H. Grinyer.  Financial modelling for planning in the U.K. , 1983 .

[25]  Francis D. Tuggle,et al.  Informational impediments to the use of capital budgeting models , 1979 .