The Investment Process and Decision Making: the Organisational Perspective

The present chapter takes an organisational perspective, focusing on the structure of an enterprise. The analysis concentrates on the nature of the enterprise as a network of stakeholder groups who are affected by, and have an influence on, the investment decision. This chapter explores the way in which the joint stock limited liability company privileges the one stakeholder group, the shareholders, and how various risk environments have influenced the development of the organisational framework and the relevant law, notably in the areas of limited liability and bankruptcy. It goes on to show how the way in which key decisions are made reflects relations between different stakeholder groups. These relations determine the distribution of both value and risk. Further sections consider key stakeholder relations, notably those between owners and managers, and between creditors and owners. The organisation of the enterprise and its capital structure provides the context in which investment decisions are made. The capital structure of an enterprise can influence the way in which risk affects the investment decision. The chapter concludes by considering the general nature of the decision-making process.