Capital Budgeting Decisions, Cash Flow Forecasts, and Management Accountants’ Motivated Reasoning: A Field Study

2021 ◽  
Author(s):  
Marc J.F. Wouters ◽  
Frank Stadtherr
Keyword(s):  
Field Study ◽  
Cash Flow ◽  
Capital Budgeting ◽  
Motivated Reasoning ◽  
Management Accountants ◽  
Cash Flow Forecasts

scholarly journals Correcting for Hubris in Project Appraisal

2012 ◽  
Vol 2012 ◽  
pp. 1-4
Author(s):  
Jacques A. Schnabel
Keyword(s):  
Adverse Events ◽  
Cash Flow ◽  
Behavioral Finance ◽  
Deleterious Effect ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Project Appraisal ◽  
Hurdle Rate ◽  
Cash Flow Forecasts

Behavioral finance research stresses the prevalence of overconfidence in capital budgeting practices. To remedy this shortcoming, specifically the upward bias in cash flow forecasts, the extant literature emphasizes the reduction of such forecasts. This paper considers the conditions under which a different adjustment is warranted, namely, an upward correction in the hurdle rate employed to evaluate the project. It is argued here that if adverse events can have a long-term, versus a merely transitory, deleterious effect on the project's cash flows, the second adjustment is appropriate.

Downsides and DCF: Valuing Biased Cash Flow Forecasts

CFA Digest ◽  
2011 ◽  
Vol 41 (4) ◽  
pp. 96-98
Author(s):  
William Ang
Keyword(s):  
Cash Flow ◽  
Cash Flow Forecasts
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