International Journal of Economic Behavior and Organization

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Capital Budgeting Decisions and the Firm’s Size

Received: 24 December 2016    Accepted: 06 January 2017    Published: 09 February 2017
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Abstract

This paper is an exploratory research on the application of capital budgeting techniques in Indian companies. This paper tries to explore the relationship between capital budgeting decisions and the firm’s size. Firm’s size has been defined as asset size, project size and turnover of the firm. This paper is based on the primary data. OLS (Observed least square Model) is used to evaluate the degree of relationship between asset size, project size and turnover of the firm with the frequency of capital budgeting techniques (FOT) and type of capital budgeting techniques (TOT) used by the companies. Using a sample size of 75 companies, the result shows that there is a positive relationship between frequency of capital budgeting techniques and application of discounted cash flow techniques with the firm’s asset size, project size and turnover of the firm. Our paper provides new insights about the frequency of the capital budgeting techniques used in the firms along with the type of technique used by the companies.

DOI 10.11648/j.ijebo.20160406.11
Published in International Journal of Economic Behavior and Organization (Volume 4, Issue 6, December 2016)
Page(s) 45-52
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Capital Budgeting, Asset Size, Project Size, Turnover of the Firm, Regression Analysis

References
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[3] Apap, Antonio, and Masson, D. J. (2004-05) “A survey of Capital Budgeting in Publicly Traded Utility Companies”, Southwest Business and Economics Journal, Vol No.13, pp. 45-52.
[4] Brealey, A. Richard. & Myers, C. Stewart. (2000), Principles of Corporate Finance, 6th Edition, McGraw-Hill College.
[5] Chandra, P. (2004), Financial Management – Theory and Practice, Tata McGraw Hill, New Delhi, pp. 289-350.
[6] Cooper, W. D. et. al (2002), “Capital Budgeting Models: Theory Vs. Practice,” Business Forum, Vol No. 26, pp. 15-18.
[7] Danielson, M. G. and Scott, J. A (2006)” The Capital Budgeting Decisions of Small Businesses”, Journal of Applied Finance, Fall/Winter, pp. 45-56.
[8] Drury, C. and Tayles, M. (1996), “UK Capital Budgeting Practices: Some Additional Survey Evidence,” The European journal of Finance, Vol 2, No 4, pp.371-388.
[9] Graham, J R and Harvey, C R (2001). “The Theory and Practice of Corporate Finance: Evidence from the Field,” Journal of Financial Economics, Vol 60, Nos 2&3, pp.187-243.
[10] Graham, J. R. and Harvey, C R. (2001). “How do CFOs Make Capital Budgeting and Capital Structure Decisions,” Journal of Applied Corporate Finance, Vol 15, No1, pp. 8-23.
[11] Gitman, J. Lawrence. (2009), Principles of Managerial Finance, 12th edition, Prentice Hall Publications.
[12] Haka, Gordon and Pinches. (1985),”Sophisticated Capital Budgeting Selection Techniques and Firm Performance,” The Accounting Review, Vol. LX, No.4, pp. 651-669.
[13] Hermes, N., Smid, P., and Yao, L., “Capital Budgeting Practices: A Comparative Study of the Netherlands and China,” International Business Review, Vol. 16, No. 5, 2007, pp. 630-654.
[14] Klammer, T. (1972), “Empirical Evidence of the Adoption of Sophisticated Capital Budgeting Techniques”, Journal of Business, Vol No. 45, pp.387-397.
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[16] Oblak, D. J, Helm Jr, R. J. (1980),” Survey and Analysis of Capital Budgeting Methods Used by Multinationals,” Financial Management, Vol. 9, No.4, pp.37-40.
[17] Pinches, G. E, Lander, D. M, “The Use of NPV in Newly Industrialized and Developing Countries: a. k. a:What have we ignored?”, Managerial Finance, Vol No. 23, pp.24-40.
[18] Ryan and Ryan (2002), “Capital Budgeting Practices of Fortune 1000: How Have Things Changed?,” Journal of Business and Management, Vol 8, No.4, pp. 355-364.
[19] Ross, M., (1986), “capital Budgeting Practices of Twelve Large Manufacturing Firms”, Financial Management, Vol. No. 15, pp. 15-22.
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Author Information
  • Department of Finance, Institute of Management & Information Science, Vivekanand Marg, Bhubaneswar, India

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  • APA Style

    Divya Gupta. (2017). Capital Budgeting Decisions and the Firm’s Size. International Journal of Economic Behavior and Organization, 4(6), 45-52. https://doi.org/10.11648/j.ijebo.20160406.11

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    ACS Style

    Divya Gupta. Capital Budgeting Decisions and the Firm’s Size. Int. J. Econ. Behav. Organ. 2017, 4(6), 45-52. doi: 10.11648/j.ijebo.20160406.11

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    AMA Style

    Divya Gupta. Capital Budgeting Decisions and the Firm’s Size. Int J Econ Behav Organ. 2017;4(6):45-52. doi: 10.11648/j.ijebo.20160406.11

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  • @article{10.11648/j.ijebo.20160406.11,
      author = {Divya Gupta},
      title = {Capital Budgeting Decisions and the Firm’s Size},
      journal = {International Journal of Economic Behavior and Organization},
      volume = {4},
      number = {6},
      pages = {45-52},
      doi = {10.11648/j.ijebo.20160406.11},
      url = {https://doi.org/10.11648/j.ijebo.20160406.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijebo.20160406.11},
      abstract = {This paper is an exploratory research on the application of capital budgeting techniques in Indian companies. This paper tries to explore the relationship between capital budgeting decisions and the firm’s size. Firm’s size has been defined as asset size, project size and turnover of the firm. This paper is based on the primary data. OLS (Observed least square Model) is used to evaluate the degree of relationship between asset size, project size and turnover of the firm with the frequency of capital budgeting techniques (FOT) and type of capital budgeting techniques (TOT) used by the companies. Using a sample size of 75 companies, the result shows that there is a positive relationship between frequency of capital budgeting techniques and application of discounted cash flow techniques with the firm’s asset size, project size and turnover of the firm. Our paper provides new insights about the frequency of the capital budgeting techniques used in the firms along with the type of technique used by the companies.},
     year = {2017}
    }
    

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    AB  - This paper is an exploratory research on the application of capital budgeting techniques in Indian companies. This paper tries to explore the relationship between capital budgeting decisions and the firm’s size. Firm’s size has been defined as asset size, project size and turnover of the firm. This paper is based on the primary data. OLS (Observed least square Model) is used to evaluate the degree of relationship between asset size, project size and turnover of the firm with the frequency of capital budgeting techniques (FOT) and type of capital budgeting techniques (TOT) used by the companies. Using a sample size of 75 companies, the result shows that there is a positive relationship between frequency of capital budgeting techniques and application of discounted cash flow techniques with the firm’s asset size, project size and turnover of the firm. Our paper provides new insights about the frequency of the capital budgeting techniques used in the firms along with the type of technique used by the companies.
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