The Influence of Affect on Capital Budgeting Decision

In this paper, we propose that affective reactions are integral to capital budgeting, and that researchers must jointly consider affect and cognition to better understand capital-budgeting decision makers´ behavior. Capital budgeting is very important to firms. Capital-budgeting activities are critical to a company´s long-term performance. Interpersonal relationships can lead to emotional affective reactions. We predict that these affective reactions can influence individual´s capital budgeting decisions, and that the influence of these affective reactions on team´s capital budgeting decision is not notable. We research the impact of affect on capital budgeting decisions through an experiment. The results of experiment demonstrate that individual will be notable influenced by the negative emotional affects when they make capital budgeting decision, and that the influence of affect is not notable when the decisions are made by team.