Capital Budgeting Practices Of Listed Companies In Malaysia

• Main Author: Sabariah, Nordin
• Format: Thesis
• Language: English; English
• Published: 2001
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/397/1/Sabariah_binti_Nordin%2C_2001.pdf; https://etd.uum.edu.my/397/2/1.Sabariah_binti_Nordin%2C_2001.pdf; https://etd.uum.edu.my/397/

The purpose of this study is to identify the reality of the practice in investment appraisal techniques within the context of listed Malaysian companies. Even though there are many methods or techniques suggested by the theory, it does not mean that companies are willing or ready to accept and apply them in their day-to-day activities. Because of that, this survey is intended to find out the realities of the practice within the capital budgeting framework. In achieving the intended purpose, questionnaires have been sent to companies listed on the Main Board of Kuala Lumpur Stock Exchange (KLSE). Questions in the questionnaire include topics such as financial analysis techniques used in the evaluation of major investment projects, risk analysis and the determination of a discount rate. Out of 140 companies, only 31 companies replied to the questionnaires. The data obtained from the questionnaires indicate the prevalent use of NPV and accounting rate of return in evaluating major capital investment projects. Besides, sensitivity and scenario analysis have been found to be the most popular techniques in assessing risk of a major project. In terms of the determination of a discount rate, interest payable on debt capital is the most preferred way of determining a discount rate. This survey is a part of continuous research effort camed out to enrich information within the area of capital budgeting context. The results obtained from this study are hopefully able to widen the knowledge, especially among academicians and managers.