Abstract
Purpose—The purpose of this study is to investigate various aspects of capital budgeting techniques adopted by Kuwaiti non-financial companies listed on the Kuwait Stock Exchange (KSE). Design/meth...
Highlights
Capital budgeting is a planning mechanism used by an organization to make evaluation decisions on how to allocate resources among investment projects
A questionnaire is used to collect data from Chief Executive Officers (CEOs), Chief Financial Officers (CFOs) and other managers of manufacturing, service and real estate companies listed on the Kuwait Stock Exchange (KSE)
Kuwaiti companies possess technology and have the required resources to install advanced technology to assist them in employing sophisticated capital budgeting techniques that take into account inflation and risk
Summary
Capital budgeting is a planning mechanism used by an organization to make evaluation decisions on how to allocate resources among investment projects. Empirical research provided inconclusive evidence regarding the capital budgeting practices among users; while several studies showed the payback period (PP) as the most popular technique employed in evaluating projects in developing countries, other studies demonstrated that Discounted Cash Methods (DCM) such as the Net Present Value (NPV) and Internal Rate of Return (IRR) are the most frequently practiced capital budgeting techniques. These findings, are questionable in countries such as the Gulf Co-operation Council (GCC) where their governments possess control over major economic activities and companies, as well as exempting investors from paying tax. Given that companies and investors are exempted from paying income tax, tax on dividends or capital gains, this would impact the capital budgeting process adopted by Kuwaiti companies where the government provides all necessary infrastructure to businesses in Kuwait and the country has enough liquidity to facilitate making capital budgeting decisions
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