Capital Investment Appraisal Practices in the Emerging Market Economy of Sri Lanka

IF 0.8 Q4 BUSINESS, FINANCE

Asian Journal of Business and Accounting Pub Date : 2018-12-18 DOI:10.22452/AJBA.VOL11NO2.4

L. Kengatharan, Mohamed Nurullah

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引用次数: 6

Abstract

Manuscript type: Research paper Research aims: This study aims to investigate the prevalent choice of capital investment appraisal practices and the influence of firm characteristics on the choice of these practices. Design/Methodology/Approach: A survey is conducted by using a sample of 186 Chief Financial Officers (CFOs) from companies listed on the Colombo Stock Exchange platform in Sri Lanka. Research findings: This study reveals that the most popular capital investment appraisal techniques used in Sri Lanka encompass Net Present Value (NPV), followed by Internal Rate of Return (IRR), Payback (PB), Accounting Rate of Return (ARR) and Discounted Payback (DPB). As for the capital investment appraisal tools incorporating risks, Sri Lankan firms prefer uncertainty absorption in cash flows, followed by sensitivity analysis, probability analysis, scenario analysis, and adjusting the required returns. Emerging real options are used at the embryonic stage in Sri Lanka. The use of naive capital budgeting practices is mostly preferred by small firms managed mainly by CFOs with non-MBA educational qualifications with short tenures in the firms. In contrast, sophisticated and advanced capital budgeting practices are mostly used by large firms managed by MBA qualified CFOs with a long tenure in the firms. As for industry differences, ARR is primarily applied by non-MBA CFOs in most non-manufacturing firms. None of the other methods trigger any significant difference in terms of industry types. Theoretical contributions/Originality: This study makes contextual contributions by providing evidence of the application of capital investment appraisal practices in an emerging market economy, namely Sri Lanka. This study also provides parametric contributions as it identifies the influence of firm characteristics on the choice of capital budgeting practices. Practitioner/Policy implications: This study raises the awareness of top management, policy makers, practitioners and stakeholders of companies with regards to capital investment appraisal practices and the influence of firm characteristics on these practices. Research limitations/Implications: A more detailed study encompassing other countries with a similar culture like Sri Lanka is beneficial for further validation, replication and generalisation. Future studies may also consider looking at the influence of behavioral factors in making capital budgeting choices. Keywords: Capital Budgeting, Risk, Developing Countries JEL Classification: G30, G31, G32JEL Classification: G30, G31, G32

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斯里兰卡新兴市场经济中的资本投资评估实践

手稿类型：研究论文研究目的：本研究旨在调查资本投资评估实践的普遍选择以及企业特征对这些实践选择的影响。设计/方法/方法：使用斯里兰卡科伦坡证券交易所平台上市公司的186名首席财务官样本进行调查。研究结果：本研究表明，斯里兰卡最常用的资本投资评估技术包括净现值（NPV），其次是内部收益率（IRR）、回报率（PB）、会计回报率（ARR）和贴现回报率（DPB）。至于包含风险的资本投资评估工具，斯里兰卡公司更喜欢吸收现金流中的不确定性，其次是敏感性分析、概率分析、情景分析和调整所需回报。新兴实物期权在斯里兰卡处于萌芽阶段。主要由具有非MBA学历、短期任职的首席财务官管理的小公司大多倾向于使用天真的资本预算做法。相比之下，复杂和先进的资本预算实践大多由具有MBA资格且在公司任职时间长的首席财务官管理的大公司使用。至于行业差异，ARR主要由大多数非制造业公司的非MBA首席财务官应用。其他方法都不会在行业类型方面引发任何显著差异。理论贡献/独创性：本研究通过提供证据证明资本投资评估实践在新兴市场经济体，即斯里兰卡的应用，做出了背景贡献。本研究还提供了参数贡献，因为它确定了企业特征对资本预算实践选择的影响。从业者/政策含义：本研究提高了公司高层管理人员、政策制定者、从业者和利益相关者对资本投资评估实践以及公司特征对这些实践的影响的认识。研究局限性/影响：对斯里兰卡等具有类似文化的其他国家进行更详细的研究，有利于进一步验证、复制和推广。未来的研究还可能考虑观察行为因素对资本预算选择的影响。关键词：资本预算，风险，发展中国家JEL分类：G30，G31，G32

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来源期刊

Asian Journal of Business and Accounting BUSINESS, FINANCE-

CiteScore

2.00

自引率

11.10%

发文量

期刊介绍： An academic journal that aims to advance knowledge in the business and accounting disciplines, to narrow the gap between theory and practice, and to set direction for policy initiatives in Asia. Welcome to the Asian Journal of Business and Accounting (AJBA). AJBA is an international refereed journal, published biannually (30th June and 30th December) by the Faculty of Business and Accountancy, University of Malaya, Malaysia. AJBA aims to publish scholarly business researches that are relevant to Malaysia and the Asian region. It intends to highlight the practical implications in promoting better business decision making process and the formulation of public policy in Asia. This journal publishes theoretical, conceptual, and empirical papers within the broad areas of business and accounting in Asia. The AJBA covers a broad spectrum of the business and accounting disciplines. A suggestive (though not necessarily comprehensive) list of areas that would be included in this journal are: general management, strategic management, human resource management, organizational behaviour, labour and industrial relations, international business management, business communication, entrepreneurship, leadership, management science, operations management, production management, supply chain management, marketing management, brand management, consumer behaviour, information management, e-marketing, e-commerce, quality management, retailing, service marketing, hospitality management, hotel and tourism management, asset pricing, capital and money markets, corporate finance, derivatives markets, finance and banking, financial economics, etc.