Accounting for strategic investment decision-making under extreme uncertainty

Moataz Elmassri, Elaine Harris, David CARTER

    Research output: Contribution to journalArticle

    17 Citations (Scopus)
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    Abstract

    This study focuses on processes employed by organisational managers making strategic investment decisions (SIDs) in an environment of extreme uncertainty in post-revolution Egypt. Our study illustrates how significant social, political and economic uncertainty impacts upon the utility of capital investment appraisal techniques employed in management accounting decision-making. To engage in this analysis, we employ strong structuration theory as a lens to examine how local Egyptian managers (agents-in-focus) respond to the impact of emergent structures that emanate from the post-revolutionary context in their strategic investment decision-making (SIDM). Our empirical evidence includes focused interviews with twenty-one local managers to understand the experience of accounting for decision-making under extreme uncertainty. Our analysis demonstrates that non-financial considerations and objectives take precedence over the technical ‘accounting’ measures, for example net present value (NPV) in post-revolution SIDM processes. In particular, recognising and responding to shifting labour power and short-term sacrifices (such as rejecting merger opportunities) become comparatively more important than the pre-supposed rationality of the NPV criteria. However, as multi-national corporations insist on the calculation of NPV by their Egyptian subsidiaries, local managers reproduce the imperfect NPV as a communication tool in relation to capital investment decisions, whilst resisting its persuasiveness in favour of more qualitative criteria.
    Original languageEnglish
    Pages (from-to)151-168
    Number of pages18
    JournalThe British Accounting Review
    Volume48
    Issue number2
    DOIs
    Publication statusPublished - 2016

    Fingerprint

    Net present value
    Uncertainty
    Investment decision-making
    Strategic investment decision
    Managers
    Capital investment
    Decision making
    Investment decision
    Management accounting
    Investment appraisal
    Economic uncertainty
    Political uncertainty
    Egypt
    Mergers
    Decision-making process
    Subsidiaries
    Multinational corporations
    Empirical evidence
    Labor
    Rationality

    Cite this

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    title = "Accounting for strategic investment decision-making under extreme uncertainty",
    abstract = "This study focuses on processes employed by organisational managers making strategic investment decisions (SIDs) in an environment of extreme uncertainty in post-revolution Egypt. Our study illustrates how significant social, political and economic uncertainty impacts upon the utility of capital investment appraisal techniques employed in management accounting decision-making. To engage in this analysis, we employ strong structuration theory as a lens to examine how local Egyptian managers (agents-in-focus) respond to the impact of emergent structures that emanate from the post-revolutionary context in their strategic investment decision-making (SIDM). Our empirical evidence includes focused interviews with twenty-one local managers to understand the experience of accounting for decision-making under extreme uncertainty. Our analysis demonstrates that non-financial considerations and objectives take precedence over the technical ‘accounting’ measures, for example net present value (NPV) in post-revolution SIDM processes. In particular, recognising and responding to shifting labour power and short-term sacrifices (such as rejecting merger opportunities) become comparatively more important than the pre-supposed rationality of the NPV criteria. However, as multi-national corporations insist on the calculation of NPV by their Egyptian subsidiaries, local managers reproduce the imperfect NPV as a communication tool in relation to capital investment decisions, whilst resisting its persuasiveness in favour of more qualitative criteria.",
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    Accounting for strategic investment decision-making under extreme uncertainty. / Elmassri, Moataz; Harris, Elaine; CARTER, David.

    In: The British Accounting Review, Vol. 48, No. 2, 2016, p. 151-168.

    Research output: Contribution to journalArticle

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