Foreign Capital Budgeting Practices Used by the U.S. and Non-U.S. Multinational Companies

Kim, Suk H.; Crick, Trevor; Farragher, Edward J.

doi:10.1080/00137918408967712

Cited by 16 publications

(4 citation statements)

References 2 publications

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“…Kim and Crick (1984) consider Stonehill and Nathanson's (1968) article to be the first major work to consider the decision within a normative financial framework. Eiteman and Stonehill (1982) summarise the additional complexities and problems of the international dimension as:…”

Section: International Capital Budgetingmentioning

confidence: 99%

“…Several American studies have been considered, (Stonehill and Nathanson 1968, Daniels 1971, Piper 1971, Baker and Beardsley 1973, Oblack and Helm 1980, Bavishi 1981, Wicks Kelly and Philippatos 1982, Stanley and Block 1983, Kim and Crick 1984, with a specific emphasis upon those studies that have concentrated upon the techniques of international capital budgeting, rather than the motivational aspects. In almost all of the studies considered the prime method of data collection was a questionnaire to the financial executives of the Fortune top 500 with other criteria as to number of overseas subsidiaries.…”

Section: Existing Empirical Researchmentioning

confidence: 99%

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Empirical Evidence of the Use of a Framework of Risk and Return in Capital Budgeting for Foreign Direct Investment

Wilson

1990

Managerial Finance

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Access to this document was granted through an Emerald subscription provided by emerald-srm:463575 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractThis paper presents the results of an empirical investigation into the capital budgeting practices of UK multinationals for foreign direct investment, with particular reference to the use of a conceptual framework of risk and return.Drawing upon Robock's (1965) criticisms of the lack of a conceptual framework for businessmen within which to make international financing and capital budgeting decisions, we assess briefly the developments in the theoretical framework of risk and return since Robock's address.We then review the existing empirical literature (mainly from America) and combine this with our own research involving 59 UK multinationals, to conclude that the developments in the theoretical framework of risk and return have not been translated into practice. We offer suggestions as to why this is the case.

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Section: International Capital Budgetingmentioning

confidence: 99%

Section: Existing Empirical Researchmentioning

confidence: 99%

Empirical Evidence of the Use of a Framework of Risk and Return in Capital Budgeting for Foreign Direct Investment

Wilson

1990

Managerial Finance

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“…By using any one, or a combination, of decision analysis techniques, the decision-maker is provided with an indication of what their investment decision ought to be, based on logical argument 14 . Previous research into the usage of decision analysis by companies has typically been survey-based and produced evidence of a difference between the decision analysis techniques described in the literature, and the decision analysis tools, which practitioners choose to use [15][16][17][18][19][20] . It appears that whilst decision analysts describe a range of decision analysis techniques, some of which are very sophisticated, organizational decision-makers are choosing to utilize only the most simplistic tools and concepts in their investment decision-making 21 .…”

Section: Introductionmentioning

confidence: 99%

Integrated Risk Analysis Criteria for Managing Exploration and Development of Oil and Gas Assets

Belhaj¹,

Haroun²,

Lay³

2010

Proceedings of SPE Western Regional Meeting

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Current petroleum industry practice (as reported by Beucher et. al.1 and Bratvold and Begg2 etc. AAPG 2008) adopts schemes that aim at separating risk into two main categories; subsurface risk that includes resource size, production rate, and access cost and surface risk that demonstrates total expenditure, facilities delivery, delays, performance, oil/gas revenues and costs.A recent SPE review (Bartvold el al SPE RE 2009) of decision making in the petroleum industry shows great dependence on VOI (Value of Information), to manage risk. VOI cannot stand alone as a decision making tool. There are also shortcomings in the use of Monte Carlo simulation.In this paper, we introduce an integrated approach for handling risk associated with oil and gas exploration as well as development of mature reservoirs through EOR and IOR. Test case includes a major asset in the Arabian Gulf Region selected due to its varying reservoir settings.The proposed approach basically, integrates uncertainty elements that may create "business risk" causing "business impact". This solution methodology breaks down each risk parameter to sub-parameters. Critical and non critical sub-parameters are broken down to even more detailed pieces of risk components, down to the smallest fragments of risk. Thereafter, a down-totop risk analysis technique is adopted to reach to target NCF (Net Cash Flow).Proposed is a tool for risk analysis modeling criteria related to exploration of oil and gas, and development of mature fields. In particular, it focuses on comprehension and inclusion and negates lumping/dropping of any risk parameter. This is not only because petroleum industry is surrounded by lots of uncertainties and therefore carries a huge risk, but also because other economies are revolving and highly dependent on this industry. In many cases, ignored risk parameters, that once thought noncritical, turned to business disasters.

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“…During this time, a number of important papers have been written presenting the results of studies on various aspects of international capital budgeting. These studies present a range of research results on such aspects as: forms of income, measurements of evaluating the effectiveness of foreign investment, discount rates used in calculating this effectiveness, ways of taking risk into account when evaluating the effectiveness of FDI [Oblak, Helm 1980;Bavishi 1981;Wicks Kelly, Philippatos 1982;Stanley, Block 1983;Kim, Farragher, Crick 1984;Backer 1987;Wilson 1990;Goddard 1990;Shao, Shao 1993;Shao, Shao 1996;Buckley et al 1996;Drury, Tayles 1996;Graham, Harvey 2001;Holmén 2007;Różański 2010]. There is, however, much less work presenting methodologies for evaluating the effectiveness of foreign investment applicable to companies from developing countries [Tsamenyi, Skliarova 2005, Karaszewski et al 2009Jaworek 2013;Karaszewski et al 2014].…”

Section: Introductionmentioning

confidence: 99%

Risk measurement and methods of evaluating FDI effectiveness among Polish companies – foreign investors (evidence from a survey) / Pomiar ryzyka i metody oceny efektywności BIZ w praktyce polskich przedsiębiorstw – inwestorów zagranicznych (wyniki badania ankietowego)

Jaworek¹,

Kuzel²,

Szóstek³

2016

Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu

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Foreign Capital Budgeting Practices Used by the U.S. and Non-U.S. Multinational Companies

Cited by 16 publications

References 2 publications

Empirical Evidence of the Use of a Framework of Risk and Return in Capital Budgeting for Foreign Direct Investment

Empirical Evidence of the Use of a Framework of Risk and Return in Capital Budgeting for Foreign Direct Investment

Integrated Risk Analysis Criteria for Managing Exploration and Development of Oil and Gas Assets

Risk measurement and methods of evaluating FDI effectiveness among Polish companies – foreign investors (evidence from a survey) / Pomiar ryzyka i metody oceny efektywności BIZ w praktyce polskich przedsiębiorstw – inwestorów zagranicznych (wyniki badania ankietowego)

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