A Critique of Capital Budgeting Questionnaires

Rosenblatt and Jucker, in a paper published in this Journal [Rosenblatt, M. J., J. V. Jucker. 1979. Capital expenditure decision-making: Some tools and trends. Interfaces9 (2).], report an “encouraging” and “unmistakable” trend of increased adoption of discounting techniques that is regarded as “significant” and “in the right direction.” The basis for their conclusion is a review of 13 studies and surveys published from 1966 through 1975. Unfortunately, a number of the studies mentioned have serious design deficiencies which result in overstating the proportion of firms using discounting techniques and the relative importance in the capital budgeting process.

To illustrate the kinds of problems that abound throughout published capital budgeting surveys, four of the surveys cited by Rosenblatt and Jucker were examined. Five surveys, not cited by Rosenblatt and Jucker, were examined with generally the same consistent pattern of deficiencies as those jointly on their list of citations and covered in this note.