Investment Appraisal. A Managerial Approach

Citation

Vinten, G. (2000), "Investment Appraisal. A Managerial Approach", Managerial Auditing Journal, Vol. 15 No. 9, pp. 478-479. https://doi.org/10.1108/maj.2000.15.9.478.2

Before anyone gets stuck into the heavy quantification that generally surrounds this subject, they really should read this book. It is indeed readable, and its clear style and presentation sugars a topic which many approach with dread. We are reminded that 87 per cent of all investment ventures either fail, or fall short of success. Additionally corporate investments are often driven by short‐term shareholder value, or by political factors, prestige, or the dominance of one party in the venture.

The author takes a holistic view of the process, since it is often the softer factors which cause problems, and all the quantification in the world will not be able to paper over the cracks of such fundamental malaise. I am reminded of a PhD research student who was investigating mergers and acquisitions at a reasonably prestigious business school. He was only examining the numbers, dismembered from their context and home base. His supervisor was unperturbed at this, and indeed had been the instigator of this approach. It was only at a seminar, rather late in the day, that other staff, including the Head of Department, commented on how unsustainable such an approach was. Had the student – and especially the supervisor – read this book, they should not have committed such an outstanding error of judgement.

Investment appraisal is set firmly in its environment, and behavioural aspects receive full treatment. Leadership, power and influence, cultural aspects, perception, motivation, mutuality of interest and confidence are the vital topic areas so often neglected elsewhere. These factors behind the numbers are the difference between Z scores and Argenti’s A score which looks at such softer behavioural factors. Without both, one is at sea without a paddle, and this is how investment becomes close to being irresponsible gambling.

The text is richly interspersed with informative boxed examples to support and evidence the main text. These are from public, private and not‐for‐profit sectors. One of these is the now defunct Bank of Credit and Commerce International. There is some irony in using Ronnie Lessem as a source on this, since in his management texts he was always extolling the virtues of this bank, regarding it as one of the most superior organisations in the planet. However, he was accurate in how the bank managed to expand, minus the all‐encompassing factor of the fraud and monumental rip‐off contrived by the bank over many years!One wonders if Lessem had been prepared to invest in this bank, or even to take the risk of opening an account with it. It is an entertainment in itself to read through the countless boxed examples, which unlike some texts, give sufficient detail to be valuable and from which to draw conclusions.

This book should be compulsory preparatory reading for those embarking on an MBA, as well as course reading for undergraduate business and finance degrees. It would not go amiss for general managers, and even those working in the City and equivalents overseas to be reminded of the messages. The arrival of such a text is to be warmly welcomed.