영문목차
1. Introduction=1
1.1. Introduction=1
1.2. Capital Budgeting=3
1.3. Capital Budgeting and Strategic Decision Making=4
1.4. Corporate Governance and Financial Management=5
1.5. Capital Budgeting and Corporate Governance=5
1.6. Capital Budgeting, Regulation, Capital Markets and Accounting Practices=6
1.6.1. Capital Budgeting and Regulation=6
1.6.2. Capital Budgeting and Capital Markets=7
1.6.3. Capital Budgeting and Accounting Practices=7
1.7. Agency Costs=8
1.8. Limitations of Existing Capital Budgeting Literature and Its Practices=10
1.9. Objective of the Research=10
1.10. Research Design and Methodology=11
1.11. Justification and Significance of the Study=12
1.12. Contribution to Knowledge : Capital Market Research Approach to Capital Budgeting=13
1.13. Outline of the Research=13
2. Literature Review=15
2.1. Introduction=15
2.2. Capital Budgeting=15
2.2.1. Significance of Capital Budgeting in Corporate Financial Management=18
2.3. Capital Budgeting Methods and Models=20
2.3.1. Accounting Rate of Return=21
2.3.2. Payback Period=21
2.3.3. Internal Rate of Return=22
2.3.4. Profitability Index or Benefit-Cost Ratio=22
2.3.5. Net Present Value=23
2.4. Corporate Governance=23
2.5. Relationship Between Capital Budgeting and Corporate Governance=26
2.6. Different Theories to Conceptualise and Incorporate Capital Budgeting and Corporate Governance in Strategic Management Framework=27
2.6.1. Stakeholder Theory=27
2.6.2. Stewardship Theory=30
2.6.3. Resource Dependent Theory=31
2.6.4. Agency Theory and Agency Cost=31
2.7. Capital Budgeting, Corporate Governance and Agency Cost=33
2.8. Capital Budgeting, Accounting Practices, Capital Markets and Regulations=35
2.8.1. Capital Budgeting and Accounting Practices=35
2.8.2. Capital Budgeting, and Capital Markets and Regulations=37
2.9. Limitations of Existing Literature and Motivation for This Study=37
2.10. Conclusion=43
3. Conceptual Framework for Investment Appraisal, and Capital Markets Research in Accounting and the Methodology=45
3.1. Introduction=45
3.2. Conceptual Framework=45
3.3. Decision-Model Approach=49
3.4. Research Methods=50
3.4.1. Experimental Research=50
3.4.2. Exploratory Research=50
3.4.3. Explanatory Research=50
3.4.4. Descriptive Research=50
3.4.5. Methods of Case Study Research=51
3.4.6. Adopted Method in this Study=51
3.5. Investment Appraisal : Discounted Cash Flow Analysis=52
3.5.1. Discounted Cash Flow=52
3.5.2. Definition of Discounted Cash Flow (DCF)=53
3.6. Accounting Information and Decision Making=53
3.6.1. Choice of Discount Rate=54
3.6.2. The Cost of Equity=57
3.6.3. Decision Criteria=58
3.7. Computer Program for DCF Analysis=60
3.8. Data Sources for DCF Analysis=60
3.9. Optimisation Methods=61
3.9.1. Introduction=61
3.9.2. Different Optimisation Methods=61
3.9.3. Choice of Optimisation Modelling Technique Used in the Study=68
3.10. Identification, Conceptualisation and Measurement of Variables, Parameters and Factors in the Model and Framework=71
3.11. Conclusion=73
4. Discounted Cash Flow for Tom.com=75
4.1. Introduction=75
4.2. Risk Management and Corporate Governance=76
4.2.1. Risk Management in Capital Budgeting=78
4.3. Core Ratios=78
4.4. Market Ratios=80
4.5. Disadvantages of Multiples (Ratios)=82
4.6. Cash Flow=82
4.7. Application of Ratios to Tom.com=83
4.7.1. Ratio Results=83
4.7.2. Tom.com Cash Flow=84
4.8. Corporate Governance and Discounted Cash Flow (DCF)=85
4.8.1. Cash Flow Risk as an Investment Appraisal Metric=88
4.8.2. Incorporating Risk in Cash Flow Using Sensitivity Analysis=88
4.8.3. Application to Tom.com=89
4.9. Capital Markets and DCF=92
4.9.1. Application to Tom.com=94
4.9.2. Results and Remarks=94
4.10. Accounting Standards and DCF=94
4.10.1. Application to Tom.com=97
4.10.2. Results and Remarks=98
4.11. Regulatory Environment Consideration and DCF (Hong Kong)=98
4.11.1. Accounting, Disclosure and Auditing Regulations=98
4.11.2. Regulation on Market Manipulation=99
4.11.3. Anti-Takeover Regulation=99
4.11.4. Application to Tom.com=100
4.11.5. Results and Remarks=101
4.12. Stakeholder Interest : Summary of Selected Accounting and Finance Metrics=101
4.12.1. Agency Costs=101
4.12.2. Executive Compensation=103
4.12.3. Application to Tom.com=103
4.12.4. Results and Remarks=103
4.13. Corporate Governance, Capital Investments and Real Options=104
4.14. Conclusion=105
5. Optimisation Model for World Airways=107
5.1. Introduction=107
5.2. Capital Budgeting, Capital Markets and Optimization Models in the Airline Industry=108
5.3. World Airways Case Study=109
5.4. The Impact of Corporate Governance and Other Capital Market Factors on Investment Appraisal and Optimisation Models=110
5.4.1. Corporate Governance=110
5.4.2. Capital Markets=110
5.4.3. Risk Management in Investment Appraisal=114
5.4.4. Regulatory Consideration and Capital Markets=115
5.4.5. Accounting Standards=116
5.5. MOLP Application to World Airways=117
5.5.1. Defining the Decision Variables=117
5.5.2. The Formulation of the Capital Budgeting Problem : The Levary and Seitz Model=119
5.5.3. Results of the Levary and Seitz Model=125
5.5.4. Modified Base/Levary and Seitz Model=135
5.5.5. Results of the Modified Model with the Agency Costs=142
5.6. Validation and Plausibility of the Model and Results=150
5.6.1. Validation of the Model and the Results=150
5.6.2. Plausibility of Results and Consistency with the Theory=150
5.6.3. General Model Applications=151
5.7. Conclusion=151
5.7.1. Base Model=151
5.7.2. Base Model and Sensitivity Analysis=151
5.7.3. Base Model Modified with Agency Costs=152
5.7.4. Modified Model and Sensitivity Analysis=152
6. Discussion and Implications=155
6.1. Introduction=155
6.2. Use of Cash Flow in Investment Decisions=156
6.3. Research Results : Tom.com=156
6.3.1. Multiple Ratio Results=156
6.3.2. Tom.com Ratio Limitations=157
6.3.3. Cash Flow Results=157
6.3.4. NPV Results=158
6.3.5. Regulatory Environment Consideration and DCF in Hong Kong=159
6.3.6. Corporate Governance and Cash Flow=159
6.3.7. Accounting Practices and Cash Flow=161
6.3.8. Cash Flow and Risk Management=162
6.3.9. Capital Markets and Cash Flow=163
6.3.10. Agency Theory, Stakeholder Theory and Cash Flow=163
6.4. Research Results : World Airways=164
6.4.1. Base Model Results Interpretation=164
6.4.2. World Airways Shadow Prices=165
6.4.3. Reduced Cost (Opportunity Cost)=165
6.4.4. Impact of Debt Equity Ratio on Objective Function : PV=165
6.4.5. Implications for the Theory and Practical Applications=167
6.5. Conclusion=169
7. Summary, Findings and Conclusion=173
7.1. Introduction=173
7.1.1. Investment Appraisal=174
7.2. A New Integrated Framework for Modelling and Analysing Capital Budgeting Issues=175
7.2.1. Corporate Governance and Agency Costs=176
7.2.2. Financial Management=177
7.2.3. Modelling and Integration=177
7.2.4. Accounting Practices=178
7.2.5. Capital Budgeting and Capital Markets Responses=179
7.3. Summary of Findings=179
7.3.1. Discounted Cash Flow=179
7.3.2. Optimisation=180
7.3.3. Implications=180
7.4. Limitations and Future Research=181
7.5. Conclusion=181
Appendix 1. Consolidated Cash Flow Statement=183
Appendix 2. Solutions of the Base Model Before Incorporating Agency Costs (AC=0)=189
Appendix 3. Solutions of the Base Model Before Incorporating Agency Costs (AC=0), After Adjusting for Shadow Price #1=193
Appendix 4. Solutions of the Base Model Before Incorporating Agency Costs (AC=0), After Adjusting For Shadow Price #2=197
Appendix 5. Solutions of the Base Model Before Incorporating Agency Costs (AC=0), After Adjusting for Shadow Price #3=201
Appendix 6. Solutions of the Base Model Before Incorporating Agency Costs (AC=0)=205
Appendix 7. Solutions of the Modified Base Model After Incorporating Agency Costs (AC=1.20), Before Adjusting for Any Shadow Price=209
Appendix 8. Solutions of the Modified Base Model After Incorporating Agency Costs (AC=1.20), After Adjusting for Shadow Prices #1=213
Appendix 9. Solutions of the Modified Base Model After Incorporating Agency Costs (AC=1.20), After Adjusting for Shadow Prices #2=217
Appendix 10. Solutions of the Modified Base Model After Incorporating Agency Costs (AC=1.20), After Adjusting for Shadow Prices #3=221
Appendix 11. Tom.com Financial Statements=225
References=229
Index=237
Table 1.1. Investment in IT=12
Table 2.1. Earnings management=36
Table 2.2. Extract of literature review=38
Table 3.1. Different types of cash flows and the discount rates applicable=56
Table 3.2. WACC illustration=57
Table 3.3. GP and MOLP summaries=69
Table 3.4. Cash flow summary for world airways=72
Table 4.1. Tom.com financial ratios' movements over 5 years=83
Table 4.2. Debt equity ratio=90
Table 4.3. Summary of the impact of discount rates and on NPV changes=91
Table 4.4. Tom.com, modified cash flow statement (Using discount rate of 30%)=95
Table 4.5. Tom.com, modified cash flow statement (using discount rate of 1,000%)=95
Table 4.6. Distinguishing features of neoclassical and relational regulation=100
Table 4.7. Selected stakeholder interests=102
Table 5.1. Assumptions on which optimality of the PV rule is based=110
Table 5.2. Cash flow summary for world airways=111
Table 5.3. Calculation of coefficients and cash flows=112
Table 5.4. Summary of calculation of coefficients=114
Table 5.5. Estimated present values (PV)=120
Table 5.6. Base model : Ranking the shadow prices=129
Table 5.7. Summary : Impact on final values by increasing the top three high ranked constraints using shadow prices by one unit ($1 million)=132
Table 5.8. Summary of the impact on optimal value after increasing the constraints with the top three high ranked shadow prices by one unit (one million) ; after excluding variables with zero values=143
Table 5.9. Ranking the shadow prices after modifying the base model with the agency costs=144
Table 5.10. Summary of the impact on final values after increasing the selected (Based on the shadow prices) top three high ranked constraints after incorporating agency costs by one unit (one million)=146
Table 5.11. Summary of the impact on optimal value after increasing the constraints with the top three high ranked shadow prices by one unit (one million), after excluding variables with zero values=148
Table 6.1. The impact of agency costs on present value and the three significant variables=170
Fig. 1.1. Research design and plan=11
Fig. 1.2. Investment in IT over time=12
Fig. 2.1. Investment appraisal and goal of the firm=16
Fig. 2.2. Link between investment, financing/dividend decisions and corporate strategic planning=19
Fig. 2.3. Relationship between capital budgeting and corporate governance=27
Fig. 2.4. Contrasting models of the corporation : the input-output model=28
Fig. 2.5. Contrasting model of the corporation : the stakeholder model=28
Fig. 2.6. The financial accounting environment=36
Fig. 3.1. Conceptual framework : integration of the elements of capital markets=46
Fig. 3.2. The link between investment, financing, dividend decisions, and corporate strategic planning=47
Fig. 3.3. NPV and IRR illustration=59
Fig. 3.4. Concepts, variables and proxies=73
Fig. 4.1. General risk framework=77
Fig. 4.2. DCF and shareholder value=86
Fig. 4.3. Flow of funds in the economy notes : Arrows indicate direction of funds flow (securities flow in opposite direction). The broken line is used to indicate that the intermediaries' own securities e.g., insurance policies or savings accounts flow to the savers=93
Fig. 4.4. Accounting standards, accounting policies and DCF=96
Fig. 5.1. Objective and constraints variables―base model=118
Fig. 5.2. Implementation, solver parameter dialog box (Base model)=124
Fig. 5.3. Solver results=125
Fig. 5.4. Optimal values of some variables after variation in coefficients of the objective function=133
Fig. 5.5. Objective function, constraints and decision variables―modified model=138
Fig. 5.6. Implementation, solver parameter dialog box (Base model modified with agency costs)=142