Determinants of Capital Budgeting Practices and Risks Adjustment among Cambodian Companies

Abstract

This study uses a sample survey to analyse the capital budgeting practices of Cambodian companies in the manufacturing sector. The findings show that payback period, NPV, discounted payback period and accounting rate of return are the most popular evaluation techniques. The study also finds that interest rate risk as well as business cycle risk are mainly adjusted with a discount rate, and the commonly used method for calculating cost of capital is the after tax cost of debt and the weighted average cost of capital (WACC). Furthermore, the finding suggests that the longer the existence of a company, the more likely for it to use NPV method. The finding also reveals that the higher the amount of capital investment, the more it is likely to use the NPV method, while the smaller the amount of capital investment, the more likely the payback method will be used. With higher educational background, NPV and ARR are most likely the methods to be used in capital budgeting among the Cambodian firms.

Yatırım Projesi Değerlendirilmesinde Kullanılan Sermaye Bütçelemesi Yöntemleri: Türkiye’nin 500 Büyük Sanayi Kuruluşu Örneği

“…Hermes et al (2007). Leon et al (2008), Maquieira et al (2012), Ahmed (2013), Daunfeldt & Harwing (2014), Batra & Verma (2017), Su et al (2018) andMa'aji &Barnett (2019) found that managers with undergraduate or graduate education use real options or dynamic methods. In addition, Ma'aji & Barnett (2019) concluded that administrators with high school, secondary or primary education generally prefer the payback period method.…”

“…This situation therefore reveals that the capital budgeting method used differs according to the age of the firm. Ryan & Ryan (2002), Sandahl & Sjogren (2003), Leon et al (2008), Singh et al (2012), Daunfeldt &Hartwig (2014), andMa'aji &Barnett (2019) found a positive and significant relationship between the age of the firm and the capital budgeting methods used. Ahmed (2013) stated that the dynamic methods of companies with an older age; on the other hand, it has been revealed that companies with a small company age (less than 5 years) prefer the payback period method the most among the static methods.…”

Role of Personality and Psychological Attributes of Financial Managers in Capital Budgeting Decisions: Case of Spinning Industry of Pakistan

“…The decision made about the increase in capital budgeting has a remarkable contribution to the business success in the long run due to sizeable investment of time and money (Brüggen & Luft, 2016;Cheng & Mahama, 2011). Several studies have been available in the literature that explores the determinants of capital budgeting decision (Brunzell, Liljeblom, & Vaihekoski, 2013;Ma'aji & Barnett, 2019). Such as financial factors, economic, societal, industrial, political and many others.…”

“…In the existing literature, several studies provide evidence on the role of personality traits of finance managers in making effective capital budgeting decisions. For instance, (e.g., Bornay-Barrachina & Cabrales, 2019) explored the role of human qualification, (Ma'aji & Barnett, 2019) emphasized the effect of technical skills, (Fehrenbacher et al, 2020;Kushwah & Mathur, 2019)) highlighted the effect mental ability of finance managers on the success of capital budgeting decisions. (Kushwah & Mathur, 2019) pointed out the role of personality traits of finance managers in deciding on capital expenditure.…”