Capital budgeting in an investment bank : a combined QFD, AHP and preemptive goal programming approach

Abstract

his project proposes an effective framework to integrate shareholders’ requirements with regard to Bank’s investment categories in an effort to rank the best project portfolios whereby they reap the benefits of their secured investments. This study attempts to utilize Quality function deployment (QFD) in investment bank sector which describes itself as a customer oriented design tool .QFD starts with House of quality (HOQ), in this project; it detects bank shareholders’ needs and prioritizes its equity categories in response to each requirement. Since the analytic hierarchy process (AHP) is capable of measuring the relative importance of capitalists’ needs as well as finding the relative weight of each investment, it was employed to fulfil the intended house of quality. For this purpose, the researcher will use primary data, which is a structured questionnaire to identify the selection-criteria “wants” in addition to analyzing data through cooperation with the Bank’s crossfunctional team. The obtained results will be shown the best investment categories to invest which aims to ensure shareholders of their final investment decisions. Afterwards, Lexicographic goal programming (LGP), a preemptive goal programming, contributes to finalize our combination regarding the derived AHPrelative weights and relevant constraints to maximize return on equity as well as minimizing risk in investment banks. In this, results will be compared to the current amount of Banks’ purchased stocks so as to demonstrate the better allocation of equity for each bank-investment option. The results of equity selection in CIMBprincipal revealed that Dali Equity Theme fund takes up the greatest weight, followed by Growth Equity Fund, Equity Aggressive Fund, Dali Equity Fund, and Al-Azzam Equity Fund. The novel combination approach is expected to allow bank’s evaluation teams to optimize the allocated funds which should be instilled in accordance with bank capitalists’ demands