Title: Managerial discretion and the choice of capital budgeting techniques

Authors: Zahida Sarwary; Timur Uman

Addresses: School of Economics and Management, Lund University, Tycho Brahes väg 1, 223 63 Lund, Sweden ' Jönköping International Business School, Gjuterigatan 5, 553 18, Jönköping, Sweden

Abstract: The purpose of this study is to apply Hambrick and Finkelstein's (1987) framework of managerial discretion to the field of capital budgeting techniques (CBT). This study uses a qualitative method based on semi-structured interviews with 12 CFOs in Swedish high-growth small and medium-sized (SMEs) firms. The findings indicate that the choice of CBTs is largely enabled by individual forces and mainly disabled by environmental and organisational forces. The study contributes with managerial implications discussing how the choice of CBT is beneficial for communication, negotiating for resources, and maintaining good relationships with stakeholders. Being aware of how to use the choice of CBT as a communication tool could give firms a competitive advantage.

Keywords: capital budgeting techniques; CBT; theory-practice gap; managerial discretion; qualitative method; First North; small and medium-sized; SMEs.

DOI: 10.1504/IJMFA.2022.123870

International Journal of Managerial and Financial Accounting, 2022 Vol.14 No.3, pp.197 - 216

Accepted: 23 Nov 2021
Published online: 04 Jul 2022 *

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