How Framed Information and Justification Impact Capital Budgeting Decisions

The purpose of this study is to investigate the effects of attribute frames and justifications on capital budgeting decisions and to examine whether the requirement to provide justification for a capital budgeting decision moderates the effect of attribute frames.

One-hundred and eleven participants made a capital budgeting decision in an experimental case that manipulated the frame of the financial evidence provided and the requirement to provide a justification.

Results suggest that both attribute frames and justifications affect capital budgeting decisions but the requirement to provide justifications did not moderate the effect of attribute frames.

This study contributes to the capital budgeting literature by identifying two factors that may bias judgments. This study also contributes to the framing literature by examining one potential method of moderating framing effects – requiring justification for decisions.