The Reason Of Enterprise Capital Budgeting Failure And Improve Research

Capital budget management is to make the enterprise can get maximumutilization of resources, get the best productivity and profitability, it makes enterprisemanagers focus on the future of each layer, better chance to explore their favorableenterprise development, at the same time take measures to deal with future adversesituation. Capital budgeting problem study has been research hot spot in financialmanagement, no accurate reasonable budget, even if subordinates perform ability,management decision-making ability is strong, again also cannot make good capitaloperation. For an enterprise, high quality to the completion of the capital budget forthe enterprise financial management goal, maintain enterprise sustainabledevelopment is of great significance. Through strengthening enterprise capital budgetmanagement, to make better control of the capital spending, according to theinvestment project assessment, understand the enterprise project investment results,provide good basis for enterprise development in the future.However, studies have shown that in the process of capital budgeting in practicein our country can’t function very well, always have a budget failure phenomenon, mainly for the unwinding of the capital budgeting, enterprise employees for budgetand budget, capital budget is the financial actions, because managers and employeesof information asymmetry, and employee’s self-interest behavior, cause the failure ofcapital budgeting, cannot effectively play the function of capital budgeting. Furtherthis paper draws the reasons leading to the invalid capital budgeting includes productcompetition in the market, capital market conditions, to managers, managers’ agencycost and the internal control of the enterprise, including product market competitionfor capital budgeting affects mainly the uncertainty of product competition in themarket, leading to the uncertainty of investment project related information, andcapital budget preparation is mainly rely on the information obtained, the informationuncertainty will lead to the unwinding of the capital budgeting, produce failurephenomenon; Capital market conditions on capital budgeting cycle of ups and downs,is mainly the influence of the capital market will affect the salary’s choice offinancing mode, and the company in each stage of the evaluation method is differentalso, so will affect the capital budget preparation process; Managers can impact oncapital budgeting is folded in half rate of the strong preference for risk selection, aswell as the information obtain from the manager, if the manager cannot do a good job in these can affect capital budget preparation and implementation, make capitalbudgeting failure; Managers’ agency cost impact on capital budgeting is theprincipal-agent theory, the principal-agent information asymmetry on both sides, bothsides in this case there will be a selfish behavior, which will leads to the failure ofcapital budgeting; Enterprise’s internal control impact on capital budgeting meansmainly is the enterprise the lack of an effective internal control, can’t to control thebehavior and the values of the employees and managers, in strict accordance with therules of the company and strategic planning to compile and execute capital budgetwork, this will make capital budgeting failure phenomenon. Finally, the paper putsforward some corresponding countermeasures according to these reasons to avoid thefailure phenomenon of capital budgeting.