Fifty years of Research on Accuracy of Capital Expenditure Project Estimates: A Review of the Findings and their Validity
Stefan Linder (slinder@whu.edu)
Finance from University Library of Munich, Germany
Abstract:
Capital budgeting research has traditionally focused on ever improving the methods used for evaluating projects. Since it seems futile to use sophisticated evaluation techniques if their input data – that is, estimates of cash inflows and outflows – are of inferior quality, it is justifiable to call this focus into question by exploring forecasting accuracy. In order to do so, the article analyzes the empirical findings on estimation error gathered in 35 studies published between 1954 and 2002. As the review shows, over-optimism seems to be a relevant problem in capital expenditure project forecasting. This calls the traditional research focus into question. More research effort targeted at the misestimation bias in capital budgeting and at ways to improve forecasting accuracy seems necessary.
Keywords: Capital budgeting; Capital Expenditures; Estimation Accuracy; Forecasting; Post-Audit. (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-04-30
New Economics Papers: this item is included in nep-acc, nep-his and nep-hpe
Note: Type of Document - pdf; pages: 24. Working paper in Acrobat Reader format.
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0504/0504023.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0504023
Access Statistics for this paper
More papers in Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA (volker.schallehn@ub.uni-muenchen.de this e-mail address is bad, please contact repec@repec.org).