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Capital Budgeting Practices: A Survey of Two Industries

Author

Listed:
  • Jorge Mota

    (DEGEIT—Department of Economics, Management and Industrial Engineering and Tourism, Campus Universitário de Santiago, University of Aveiro, 3810-193 Aveiro, Portugal
    GOVCOPP—Research Unit on Governance, Competitiveness and Public Policies, University of Aveiro, 3810-193 Aveiro, Portugal
    CICEE—Research Center in Business and Economics, UAL, 1150-293 Lisboa, Portugal)

  • António Carrizo Moreira

    (DEGEIT—Department of Economics, Management and Industrial Engineering and Tourism, Campus Universitário de Santiago, University of Aveiro, 3810-193 Aveiro, Portugal
    GOVCOPP—Research Unit on Governance, Competitiveness and Public Policies, University of Aveiro, 3810-193 Aveiro, Portugal
    INESCTEC—Institute for Systems and Computer Engineering, Technology and Science, Campus da Faculdade de Engenharia da Universidade do Porto, Rua Dr. Roberto Frias, 4200-465 Porto, Portugal
    NECE-UBI—Research Center for Business Sciences, Universidade da Beira Interior, 6200-209 Covilhã, Portugal)

Abstract

This research examines the capital budgeting practices used by small and medium-sized firms (SMEs) in two Portuguese industries, footwear and metalworking, aiming at answering the following research questions: How much knowledge do managers have about capital budgeting practices? What are the most used practices? How much importance do they attribute to applying them? The research was conducted through an online survey with a response rate of 14.9%. The results document that most companies in both industries are familiar with capital budgeting practices, despite differences between the two. The footwear industry recognizes the importance of these indicators but makes little use of them, and many companies prefer using payback period (PBP). The metalworking industry, on the other hand, makes greater use of capital budgeting practices, with net present value being the favored indicator and PBP being used as supplementary. This study contributes to the capital budgeting literature in two ways: first, by focusing on SMEs instead of only large firms, and second, by exploring data from two industries rather than multiple, heterogeneous industries.

Suggested Citation

  • Jorge Mota & António Carrizo Moreira, 2023. "Capital Budgeting Practices: A Survey of Two Industries," JRFM, MDPI, vol. 16(3), pages 1-15, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:191-:d:1094754
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    References listed on IDEAS

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    Cited by:

    1. Ștefan Cristian Gherghina, 2023. "Corporate Finance, Governance, and Social Responsibility," JRFM, MDPI, vol. 16(6), pages 1-5, June.

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