A Feasibility Study of Economic and Environmental Scenarios by Means of Interactive Multiple Goal Programming

In this paper we describe our experiences with the application of a multiple criteria decision making method (IMGP = Interactive Multiple Goal Programming) for the evaluation of economic policy in the Netherlands. An uncommon aspect of this study is that the multiple criteria decision method was not used to find an optimal solution, but rather to test the attainability of a number of contrasting scenarios for economic development. These scenarios are intended to represent the main options for the development of the Netherlands in the eighties. Within the framework of a broader research project (labeled Policy-Oriented Survey of the Future), these scenarios are linked to characteristic political views

The Virtual Reality of Financial-Economic Decision-Making

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An interactive heuristic for financial planning in decentralized organizations.

Planning and controlling overall performance in decentralized organizations is a complex task for central management because it is contronted with incomplete information on organizational opportunities and possible conflicts of interest with local managers. Many formal procedures for the support of planning processes in decentralized organizations are based on decomposition methods for mathematical programming. Most of these procedures assume organizational decision models with a single overall goal that is supported by all decision makers involved. In this paper, a framework for an interactive heuristic planning procedure is proposed for decentralized organizational decision models with multiple goals that may be conflicting within and between decision levels. This procedure aims at solving the planning problem straightforwardly in a low number of information exchanges between the decision levels, which makes it more acceptable for decision makers in practice

Financial Modelling: Where to go? with an illustration for portfolio management

The definition of Financial Modelling chosen by the EURO working group on financial modelling is ‘the development and implementation of tools supporting firms, investors, intermediaries, governments and others in their financial-economic decision making, including the validation of the premises behind these tools and the measurement of the effectivity of the use of these tools’. Clearly, in this definition, the decision and its solution is central. Unlike financial modelling in our definition, the theory of finance is not so much concerned with individual decisions, but rather with the effects of the decisions and actions of many individuals on the formation of prices in financial markets. It is therefore no wonder that the assumptions underlying financial theory, which at best describe ‘average individuals’ and ‘average decision situations’, are not suited to describe specific individual decision problems. In our view it is the role of financial modelling to support individual decision making, taking account of the peculiarities of the actual case, where possible taking benefit from the results of the financial theory. This philosophy towards financial modelling is illustrated by a framework for portfolio management

Optimal Capital Structure: Reflections on Economic and Other Values

Despite a vast literature on the capital structure of the firm there still is a big gap between theory and practice. Starting with the seminal work by Modigliani & Miller, much attention has been paid to the optimality of capital structure from the shareholders’ point of view. Over the last few decades studies have been produced on the effect of other stakeholders’ interests on capital structure. Well-known examples are the interests of customers who receive product or service guarantees from the company. Another area that has received considerable attention is the relation between managerial incentives and capital structure. Furthermore, the issue of corporate control and, related, the issue of corporate governance, receive a lion’s part of the more recent academic attention for capital structure decisions. From all these studies, one thing is clear: The capital structure decision (or rather, the management of the capital structure over time) has to deal with more issues than the maximization of the firm’s market value alone. In this paper, we give an overview of the different objectives and considerations that have been proposed in the literature. We show that capital structure decisions can be framed as multiple criteria decision problems which can then benefit from multiple criteria decision support tools that are widely available

A Multidimensional Framework for Financial-Economic Decisions

Most financial-economic decisions are made consciously, with a clear and constant drive to "good", "better" or even "optimal" decisions. Nevertheless, many decisions in practice do not earn these qualifications, despite the availability of financial economic theory, decision sciences and ample resources. We plea for the development of a multidimensional framework to support financial economic decision processes. Our aim is to achieve a better integration of available theory and decision technologies. We sketch (a) what the framework should look like, (b) what elements of the framework already exist and which not, and (c) how the MCDA community can co-operate in its development.Most financial-economic decisions are made consciously, with a clear and constant drive to ???good???, ???better??? or even ???optimal??? decisions. Nevertheless, many decisions in practice do not earn these qualifications, despite the availability of financial economic theory, decision sciences and ample resources. We plea for the development of a multidimensional framework to support financial economic decision processes. Our aim is to achieve a better integration of available theory and decision technologies. We sketch (a) what the framework should look like, (b) what elements of the framework already exist and which not, and (c) how the MCDA community can co-operate in its development

Financial Planning with Fractional Goals

When solving financial planning problems with multiple goals by means of multiple objective programming, the presence of fractional goals leads to technical difficulties. In this paper we present a straightforward interactive approach for solving such linear fractional programs with multiple goal variables. The approach is illustrated by means of an example in financial planning

The Relevance of MCDM for Financial Decisions

For people working in finance, either in academia or in practice or in both, the combination of ?finance? and ?multiple criteria? is not obvious. However, we believe that many of the tools developed in the field of MCDM can contribute both to the quality of the financial economic decision making process and to the quality of the resulting decisions. In this paper we answer the question why financial decision problems should be considered as multiple criteria decision problems and should be treated accordingly