Capital investment decisions in theory and practice: A cross-sectional study of firms in the electrical, office and household equipment, and non-metallic mineral industries / Anthony Chin Yoke Sheng

• Main Author: Anthony , Chin Yoke Sheng
• Format: Thesis
• Published: 1969
• Subjects: H Social Sciences (General); HC Economic History and Conditions
• Online Access: http://studentsrepo.um.edu.my/10374/1/Anthony_Chin_Yoke_Sheng.pdf; http://studentsrepo.um.edu.my/10374/

The capital investment decisions of a firm are, perhaps, its most important decisions. They determine not only the basic business risk of the firm but also its profitability. Capital budgeting is concerned with the costs and benefits of investment projects undertaken by a firm. Capital budgeting procedures provide a systematic method of organizing the available information about potential investments into decisions of acceptance or rejection. Because the information about projects is not always certain, there must be techniques for measuring the risks attached to investments, as well as for computing costs and benefits. The primary objective of this study is to determine the extent to which the capital investment practices of a number of Malaysian firms conform to capital investment theory. There are, therefore, two parts to this study. Part I presents a systematic examination of capital investment theory. Accordingly, a chapter each has been devoted to investment analysis, cost of capital analysis, and risk analysis. Part II is a study of the capital investment practices of a group of Malaysian industrial companies. This section comprises two parts: a survey of the capital investment practices of the selected companies, followed by detailed case studies of the capital investment practices of two of the companies. The finding of this study is that capital investment practice conforms only partly to the theory of capital investment decisions. On the whole, the majority of the firms surveyed professed to have capital budgeting procedures. However, the sophistication of such procedures varied considerably from firm to firm. A significant relationship as discovered between the relative sophistication of capital investment procedures and the country of ownership of the firms. Size and industrial grouping does not appear to have had very much influence on the capital investment practices employed by the firms.