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Investment decisions and capital budgeting practices in German manufacturing companies

Author

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  • Dennis Schlegel
  • Franziska Frank
  • Bernd Britzelmaier

Abstract

This paper aims to explore the methods and techniques that are used to make investment decisions in German manufacturing companies. It intends to investigate whether the behaviour of companies is in line with finance and management accounting theory. Based on a literature review taking into account specifics of German management accounting techniques, a survey instrument was developed. It includes questions on both investment appraisal methods and cost-of-capital. The questionnaire was administered in a web-based survey with a final sample size of 65 companies from the manufacturing sector in Germany. It is found that the net present value (NPV) technique is the most prominent method applied by the sample companies. Moreover, significant differences between companies of different sizes are identified. In smaller companies, single period methods such as cost comparison are more popular whereas larger companies tend to use multi-period methods.

Suggested Citation

  • Dennis Schlegel & Franziska Frank & Bernd Britzelmaier, 2016. "Investment decisions and capital budgeting practices in German manufacturing companies," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 16(1), pages 66-78.
    • Handle: RePEc:ids:ijbglo:v:16:y:2016:i:1:p:66-78
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    Cited by:

    1. Nene Lartey Addico & Godfred Amewu & Anthony Owusu‐Ansah, 2022. "The use of investment decision techniques and tools in practice in a frontier market: Evidence from Ghana," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1748-1763, September.
    2. Shahid Ali & Qingyou Yan & Muhammad Sajjad Hussain & Muhammad Irfan & Munir Ahmad & Asif Razzaq & Vishal Dagar & Cem Işık, 2021. "Evaluating Green Technology Strategies for the Sustainable Development of Solar Power Projects: Evidence from Pakistan," Sustainability, MDPI, vol. 13(23), pages 1-29, November.

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