Capital budgeting decisions: evidence from India

Shveta Singh · Pawan Jain · Surendra S. Yadav

46 citations0/0 files storedJournal of Advances in Management Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Capital Investment and Risk Analysis Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

Purpose The purpose of this paper is to understand current practices in capital budgeting (including real options) in Indian companies and provide a normative framework (guidelines) for practitioners (based on our findings and literature reviewed). Design/methodology/approach A questionnaire survey was administered to 166 non-financial companies of the BSE 200 index. Secondary data were also collated from 2001-2011. Findings Trends towards sophisticated techniques and sound capital budgeting decisions have continued in India. All sample respondent firms used discounted cash flow (DCF) techniques in conjunction with non-DCF techniques. Internal rate of return (IRR), used by more than three quarters of the sample companies, is favored over net present value (NPV), used by half of the sample companies. Real options are used by half of the sample companies. Permanent (long-term) capital has been used to finance fixed assets (net) and working capital (net). Research limitations/implications The limitations of the study are that it is country specific and a detailed sectoral analysis of the constituent sectors of the sample companies could have perhaps provided deeper insight into the subject. Practical implications The findings of this research, decades of teaching experience of the authors and the literature reviewed have been utilized to evaluate current practices and suggest possible improvements in decision making (through a normative framework). Originality/value The findings show that there still remains a theory-practice gap in the usage of IRR over NPV. The usage of permanent (long-term) capital to fund fixed assets (net) and permanent working capital requirements, although sound, could be an indication of surplus funds which could be used to repay long-term debt or finance more asset building.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 46 citations exist upstream.

References

2001The theory and practice of corporate finance: evidence from the field 1985Capital Rationing and Organizational Slack in Capital Budgeting 2004Corporate Finance in Europe Confronting Theory with Practice 1977A Survey of Capital Budgeting Techniques Used by Major U.S. Firms 1978SURVEY AND ANALYSIS OF CAPITAL BUDGETING METHODS 1964Risk analysis capital investment 1996A LONGITUDINAL SURVEY ON CAPITAL BUDGETING PRACTICES 2010Improved capital budgeting decision making: evidence from Canada

Cited by

2019The evolution of the application of capital budgeting techniques in enterprises 2015Capital budgeting practices: evidence from Sri Lanka 2016Monte Carlo on Net Present Value for Capital Investment in Malaysia 2024Assessing the influence of financial management practices on organizational performance of small- and medium-scale enterprises 2016Capital Budgeting Theory and Practice: A Review and Agenda for Future Research 2021

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.