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Risk analysis in capital budgeting: Barriers and benefits

Author

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  • Pike, RH
  • Ho, SSM

Abstract

The empirical literature suggests that one reason for the lack of widespread acceptance of risk analysis methods by firms in assessing capital investment projects is that it is marred by some inherent and practical problems still to be resolved. The objective of this paper is to examine UK managers' attitudes towards and practices of risk analysis, the barriers that they encounter when introducing risk analysis, and their perceived impact and overall evaluation of using risk analysis. It reports the findings from a comprehensive UK survey which covered a wide range of risk analysis implementation issues in capital budgeting. Some possible suggestions to bridge the gap between theory and management practice are discussed.

Suggested Citation

  • Pike, RH & Ho, SSM, 1991. "Risk analysis in capital budgeting: Barriers and benefits," Omega, Elsevier, vol. 19(4), pages 235-245.
    • Handle: RePEc:eee:jomega:v:19:y:1991:i:4:p:235-245
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    Cited by:

    1. Riya Sureka & Satish Kumar & Deepraj Mukherjee & Christina Theodoraki, 2023. "What restricts SMEs from adopting sophisticated capital budgeting practices?," Small Business Economics, Springer, vol. 60(1), pages 265-290, January.
    2. Williams, Terry, 1995. "A classified bibliography of recent research relating to project risk management," European Journal of Operational Research, Elsevier, vol. 85(1), pages 18-38, August.
    3. Huikku, Jari & Karjalainen, Jouko & Seppälä, Tomi, 2018. "The dynamism of pre-decision controls in the appraisal of strategic investments," The British Accounting Review, Elsevier, vol. 50(5), pages 516-538.
    4. Sureka, Riya & Kumar, Satish & Colombage, Sisira & Abedin, Mohammad Zoynul, 2022. "Five decades of research on capital budgeting – A systematic review and future research agenda," Research in International Business and Finance, Elsevier, vol. 60(C).

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