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Investment Decision-making Research

Posted on:2005-12-26Degree:MasterType:Thesis
Country:ChinaCandidate:R C ChenFull Text:PDF
GTID:2206360122480703Subject:Accounting
Abstract/Summary:PDF Full Text Request
Investment decision-making is an important part of the financial management. But there is little system study in this area. Some experts on management, economists provided the general principal of management decision-making and strategic planning from their own standpoints. But they didn't organically integrate the decision-making theories, strategic management and financial management. That is why I choose this topic. In this paper I provide the techniques system and control system of corporation investment decision-making by the integration of management, Economics and financial management theory. And take a real estate company as an example to analyze the specific apply of the investment decision-making system theory.It is considered possible to make scientific Corporation investment decisions. Conventional investment theories held that successful investments only depended on opportunities. Because the future environment is uncertain, And nobody can expect it precisely. There is sense in these theories as they revealed the fact that the investment has high risk. With the development of the management, economics and also investment theories themselves, conventional investment theories are replaced by the new and scientific modern investment theories and the latter are the main stream of the investment theories. The following is the main points of the modern investment theories:(1) The root of the return on corporation investment lies in the fact that corporation controls particular intellective property not physical property.(2) Corporation controls large amount of social resources by means of investment, transferring the problem of resources allocation which should be settled by the market into the problem of the internal management. It can get more profit through cutting down the transaction cost. (3) As that any product has the life cycle: introduction, development, maturation and wane. Exploiting new products is necessary for the sustainable development of the corporation.(4) Investment gross should be rational.(5) Investment should be strategic. Investment decision-making is not decided by the profit of the investment some times. It is possible to invest just for competitive edge such as larger scale or extended market place. (6) Risk not only can be measured, but also can be controlled and priced.(7) Investment is a dynamic process. So investment can be regarded as buying an option. Investment decision-making can be analyzed by the option theories.Theories which support the above points are: Manufacturer Specific Advantage Theory ( Stephen H. Hymer, 1960; Charles P. Kindle Berger, 1969 ), Internalization Theory ( Ronald H. Coase, 1937 ), Product Life Cycle Theory ( Raymond Vernon, 1966 ), Competitive Strategy Theory ( Michael E. Porter, 80s of the twentieth century ), Physical Option Theory ( Stephen A. Ross, 1995 ). These are the theoretical fountain-head of modern investment decision-making system.Our country is now in the period of economic transformation, and is using the advanced management theory of other countries for reference. But it is not wise to mechanically copy these theories, or they will unaccustomed to the climate of a new place .From the angle of investment decision-making, the following circumstances should be taken into consideration:(1) In China, the most dynamic economy is small and medium sized enterprises , but the quality of their products are always inferior. It is difficult for them to edge into the world market. The lower cost of the products is more tally with the lower level of national income and domestic consumption.(2) Size economy still has a bright future in china. Most of the Chinese industries and enterprises are far from the economic size.(3) The privatization of the Chinese economy is far-gone. Plenty of the private enterprises have emerged and are establishing, and they are becoming more and more sensitive to the market. Decision-making procedures are simplified greatly. At the same time,...
Keywords/Search Tags:Investment decision-making, Theory basis, Decision-making method, Option
PDF Full Text Request
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