The capital budgeting evaluation practices (2014) of contractors in the Hong Kong construction industry

Abstract

Capital budget evaluation plays a crucial role in financial management. This places a firm in a competitive position. Recent development points to the need for implementing capital budgeting in construction organizations due to the capital-intensive nature of construction business. The aim here is to investigate the trends in the practice of capital budget evaluation among construction contractors operating in Hong Kong over a 20-year period. A longitudinal survey approach is used; four cross-sectional surveys were conducted between 1994 and 2014. The findings indicate that ‘formal financial evaluation’ is the most common technique used for capital budget evaluation. In addition, the practice of capital budget evaluation is more pronounced in the large-sized firms. A comparative analysis of the results of the four surveys reveals that there are variations in the degree and frequency of use of capital budget evaluation techniques over the study period. Further research is needed to understand the challenges associated with the use of sophisticated capital budget evaluation techniques in the construction industry of Hong Kong.