Factors affecting biasing of capital budgeting cash flow forecasts: evidence from the hotel industry

Turner, Michael J. and Guilding, Chris (2012) Factors affecting biasing of capital budgeting cash flow forecasts: evidence from the hotel industry. Accounting and Business Research, 42 5: 519-545. doi:10.1080/00014788.2012.670405


Author Turner, Michael J.
Guilding, Chris
Title Factors affecting biasing of capital budgeting cash flow forecasts: evidence from the hotel industry
Journal name Accounting and Business Research   Check publisher's open access policy
ISSN 0001-4788
2159-4260
Publication date 2012-12
Sub-type Article (original research)
DOI 10.1080/00014788.2012.670405
Open Access Status
Volume 42
Issue 5
Start page 519
End page 545
Total pages 27
Place of publication Abingdon, Oxon, United Kingdom
Publisher Routledge
Collection year 2013
Language eng
Abstract This study contributes to a neglected aspect of the capital budgeting process, namely, the proposal development stage, which is primarily concerned with project cash flow estimation. Given that the deployment of sophisticated selection techniques is severely undermined when directed to input data suffering from bias, it is surprising that minimal empirical research has sought to explore for antecedent factors associated with biasing of capital budgeting cash flow forecasts. This paper reports the findings of a survey concerned with determining factors associated with biasing of capital budget cash flow forecasts in hotels that are mediated by a management contract. Statistically significant support is provided for the view that higher levels of biasing of capital budget cash flow forecasts occur in the presence of: high emphasis attached to the payback investment appraisal method; deficient reserve funds for furniture, fittings, and equipment (FF&E); low operator accessibility to reserve funds for FF&E; shorter periods of time to management contract expiry; and high emphasis attached to non-financial factors in capital budgeting appraisal.
Keyword Capital budgeting
Cash flow forecasting
FF&E reserve
Hotel management contract
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2013 Collection
UQ Business School Publications
 
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