Asian Research Consortium

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Asian Research Consortium Asian Journal of Research in Banking and Finance Vol. 7, No. 4, April 2017, pp. 57-74 Asian Journal of Research in Banking and Finance ISSN 2249-7323 www.aijsh.

1 Asian Research Consortium Asian Journal of Research in Banking and Finance Vol. 7, No. 4, April 2017, pp Asian Journal of Research in Banking and Finance ISSN A Journal Indexed in Indian Citation Index DOI NUMBER: / Capital Budgeting Practices: State of the Art Vikrant Mohan*; Karam Pal Narwal** *Junior Research Fellow, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India. vikrant19rs@gmail.com **Professor, Faculty, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, Haryana, India. Karampalhsb@Gmail.Com Abstract The purpose of this review paper is to investigate the current state of the art of capital budgeting practices, across countries, determinants influencing capital budgeting practice; and providing future research agenda. The published studies were identified and retrieved using electronic databases accessible through the author s university library system using search parameter and screened against explicit inclusion and exclusion criteria. Thematic analysis was applied to analyze them. Results reveal that project identification, cash-flow estimation and post-audit stage still remains relatively less explored and requires focused in-depth survey investigation. Increased use of DCF techniques (mainly IRR and NPV) along with PB is found in both developed and developing countries for evaluating capital investment projects. Application of real option has gained popularity in last two decades. Risk analysis has become more sophisticated in recent time and increased use of sensitivity and scenario analysis was found for risk assessment. Determinants influencing capital budgeting practices explained the WHY of capital budgeting practices. Present work updates the literature, fills the gap in literature by increasing scope and coverage of articles and provide basis for further research. 57

2 Keywords: Capital budgeting practices, cash-flow estimation, DCF-techniques, non- DCF techniques, risk analysis, discount rate, capital rationing and post-audit. References Ahmed, I.E. (2013). Factors determining the selection of capital budgeting techniques. Journal of Finance and Investment Analysis, 2(2): Al-Mutairi, M., Tian, G., Hasan, H. & Tan, A. (2012). Corporate governance and corporate finance practices in a Kuwait stock exchange market listed firm: a survey to confront theory with practice. Corporate Governance: The International Journal of Business in Society, 12(5): Anand, M. (2002). Corporate finance practices in India: a survey. Vikalpa, 27(4): Andor, G., Mohanty, S.K. & Toth, T. (2011). Capital budgeting practices: a survey of Central and Eastern European firm. Retrieved January 31, 2016, from 1-Braga/papers/0118.pdf Andrés, P., Fuente, G. & Martín, P. (2015). Capital budgeting practices in Spain. Business research quarterly, 18(1): Arnold, G.C. & Hatzopoulos, P.D. (2000). The theory practice gap in capital budgeting: evidence from the United Kingdom. Journal of Business Finance and Accounting, 27(5-6): Arora, P. (2012). An empirical investigation of capital budgeting practices in India. International Journal of Research in Commerce and Management, 3(5): Arslan, M., Zaman, R. & Sidiqui, M.A. (2014). Impact of firm size on capital budgeting techniques: An empirical study of textile firms in Pakistan. Developing Country Studies, 4(18): Azzone, G. & Maccarrone, P. (2001). The design of the investment post-audit process in large organisations: Evidence from a survey. European Journal of Innovation Management, 4(2): Baker, H.K. and English, P. (2011). Capital Budgeting Valuation: Financial Analysis For Today s Investment Projects. New Jersey, NY: John Wiley and Sons. Baker, H.K., Dutta, S. & Saadi, S. (2011). Corporate finance practices in Canada: Where do we stand? Multinational Finance Journal, 15(3/4): Batra, R. & Verma, S. (2014). An empirical insight into different stages of capital budgeting. Global Business Review, 15(2): Bedi, A. (2005). Capital Budgeting, New Delhi: Deep and Deep Publications Pvt. Ltd. 58

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5 Khamees, B.A., Al-Fayoumi, N. and Al-Thuneibat, A.A. (2010), Capital budgeting practices in the Jordanian industrial corporations, International Journal of Commerce and Management, Vol. 20 No. 1, pp Khan, M. Y. & Jain, P. K. (2014). Financial Management: Text, Problems and Cases (7th ed.) New Delhi: McGraw Hill Education Pvt. Ltd. Klammer, T. (1972). Empirical evidence of the adoption of sophisticated capital budgeting techniques. Journal of Business, 45(3): Klammer, T. (1973). The association of capital budgeting techniques with firm performance. The Accounting Review, 48(2): Klammer, T., Wilner, N., & Smolarski, J. (2002). A comparative survey of capital investment decision practices in the United States and the United Kingdom. International Business & Economics Research Journal, 1(11): Leon, F. M., Isa. M., & Kester, G. W. (2008). Capital budgeting practices of listed Indonesian companies. Asian Journal of Business and Accounting, 1(2); Maccarrone, P. (1996). Organizing the capital budgeting process in large firms. Management Decision, 34(6): Mao, J. C. (1970). Survey of capital budgeting: Theory and practice. The Journal of Finance, 25(2): Maroyi, V., & van der Poll, H. M. (2012). A survey of capital budgeting techniques used by listed mining companies in South Africa. African Journal of Business Management, 6(32): Mintzberg, H., Raisinghani, D., & Théorêt, A. (1976). The structure of "unstructured" decision processes. Administrative Science Quarterly, 21(2): Mukherjee, T. K., & Henderson, G. V. (1987). The capital budgeting process: Theory and practice. Interfaces, 17(2): Munyao, A., Kalui, F. M., & Ngeta, J. (2014). The relationship between capital budgeting techniques and financial performance of companies listed at the Nairobi stock exchange, Kenya. Scholarly Research Journal for Humanity Science & English Language, 1(5): Northcott, D. (1998). Capital investment decision-making, London, CIMA: International Thomson Business Press. Oblak, D. J., & Helm, R. J. (1980). Survey and analysis of capital budgeting methods used by multinationals. Financial Management, 9(4):

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Capital Budgeting Decisions and the Firm s Size

Capital Budgeting Decisions and the Firm s Size International Journal of Economic Behavior and Organization 2016; 4(6): 45-52 http://www.sciencepublishinggroup.com/j/ijebo doi: 10.11648/j.ijebo.20160406.11 ISSN: 2328-7608 (Print); ISSN: 2328-7616 (Online)