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Capital budgeting practices by large Brazilian companies

Author

Listed:
  • Paula de Souza

    (Universidade Federal de Santa Catarina, Brazil)

  • Rogério João Lunkes

    (Universidade Federal de Santa Catarina, Brazil)

Abstract

This article aims to analyze the use of capital budgeting practices by large Brazilian companies. The survey technique was used for data collection in 51 companies traded on the Stock Exchange. Descriptive statistics were applied, aiming to improve the basis for discussions. The correlation was used to assess the theoretical assumptions of the research. The results show that companies adopt especially the Payback Period, the Net Present Value and the Internal Rate of Return in the assessment of capital budgeting, with scenario and sensitivity analyses to examine the investment risk. The assessment of theoretical assumptions developed in the study has shown that there is no relationship of cause and effect among the variables to explain the use of more sophisticated budgeting practices. Based on similar studies, it is concluded that there is a general trend of increasing sophistication in the various stages of investments budget in large Brazilian companies.

Suggested Citation

  • Paula de Souza & Rogério João Lunkes, 2016. "Capital budgeting practices by large Brazilian companies," Contaduría y Administración, Accounting and Management, vol. 61(3), pages 514-534, Julio-Sep.
    • Handle: RePEc:nax:conyad:v:61:y:2016:i:3:p:514-534
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    File URL: http://www.cya.unam.mx/index.php/cya/article/view/1127
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    References listed on IDEAS

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    1. Dirk Brounen & Abe de Jong & Kees Koedijk, 2004. "Corporate Finance in Europe: Confronting Theory with Practice," Financial Management, Financial Management Association, vol. 33(4), Winter.
    2. Stanley Block, 2011. "Does the Weighted Average Cost of Capital Describe the Real-World Approach to the Discount Rate?," The Engineering Economist, Taylor & Francis Journals, vol. 56(2), pages 170-180.
    3. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory‐Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5‐6), pages 603-626, June.
    4. Brounen, D. & de Jong, A. & Koedijk, C.G., 2004. "Corporate Finance In Europe Confronting Theory With Practice," ERIM Report Series Research in Management ERS-2004-002-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    5. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5&6), pages 603-626.
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    Cited by:

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    5. Riya Sureka & Satish Kumar & Deepraj Mukherjee & Christina Theodoraki, 2023. "What restricts SMEs from adopting sophisticated capital budgeting practices?," Small Business Economics, Springer, vol. 60(1), pages 265-290, January.

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    More about this item

    Keywords

    Capital budgeting; Practices of the capital budgeting; Large Brazilian companies; Stock exchange; Investments;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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