The Influence of the Culture on Managers’ Capital-Budget Decisions

Abstract

Some researches in behavior accounting focus on the emotional affect and examine the influence of the emotional affect especially negative affect on capital budget decision-making. Kida, Moreno and Smith (2001) find that these affective reactions especially negative affect will influence managers' capital-budgeting decisions; managers will reject alternative that elicit negative affect even though it has higher economic values. Kida and Smith (2002) provide evidence that affective reaction will influence managers' risk-taking tendency in capital-budget decisions. However, these two studies fail to consider the role of different level individualism when they investigate the influence of affect on decision-making. Therefore, this study extends Kida et. al (2001) to investigate the role of culture in the context of affect and decision-making. This study finds that managers who are from low-individualism cultures are less likely to reject the alternatives that elicit negative affect but having high economic values than those managers who are from high-level individualist cultures.

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