Transformations  in
Business & Economics

Investment Decision Making: A Case Study of Six Estonian Companies
Helle Hammer

ABSTRACT. To study the practice of investment decision-making in Estonia, a written survey of 40 companies and six case studies were carried out. The conclusions made on the basis of the written questionnaire differ considerably from the conclusions made on the basis of both the survey and field research. In the former case, one could conclude that finance theory is quite well implemented in Estonian practice. In the latter case, one could only say that some of the theoretical concepts are used, but not in the scope and extent prescribed by the finance theory. This article focuses on the results of the field research. Three main conclusions from the case studies are: 1) before analysis, all investment projects are categorized and the depth of financial and strategic analysis performed varies considerably depending on the type of investment; 2) investment appraisal is just one part of a larger budgeting process. The other stages in investment decision-making are often considered more important than the financial analysis stage; 3) even though sophisticated analysis methods are quite well known by Estonian managers and frequently used for project appraisal, the “financial figures” do not usually have critical weight in decision-making; rather, the emphasis is on strategic considerations and decisions are often made intuitively.

KEYWORDS: investment decision-making, capital budgeting; case study method, investment appraisal, Estonia.