Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia
The empirical analysis of capital budgeting or investment appraisal is a topic that has been widely studied in developed countries, such as the United States, the United Kingdom, and Canada. The documentation of these practices in emerging countries is scarce. This paper provides some information ab...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Universidad EAFIT
2014-12-01
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| Series: | Ecos de Economía |
| Subjects: | |
| Online Access: | http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/2713 |
| _version_ | 1818142717598760960 |
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| author | Julián Ochoa Yepes Andrés Mauricio Mora Cuartas |
| author_facet | Julián Ochoa Yepes Andrés Mauricio Mora Cuartas |
| author_sort | Julián Ochoa Yepes |
| collection | DOAJ |
| description | The empirical analysis of capital budgeting or investment appraisal is a topic that has been widely studied in developed countries, such as the United States, the United Kingdom, and Canada. The documentation of these practices in emerging countries is scarce. This paper provides some information about current capital budgeting techniques through an empirical study of practices in a group of Colombian companies in the construction industry. In the companies surveyed it was found that 86% of professionals use the most recommended methods in the literature, such as the Internal Rate of Return (IRR) and Net Present Value (NPV), with a preference for the IRR (50% always use it) over the NPV (36% always use it). It was also found that 95% lack knowledge of more sophisticated methods, such as Real Options (OR). Most of the respondents subjectively determine the discount rate that is used for evaluation, indicating the lack of any theoretical justification to determine an appropriate rate. |
| first_indexed | 2024-12-11T11:20:13Z |
| format | Article |
| id | doaj.art-1ea2c11060fa4be08b7c1dafe1beae05 |
| institution | Directory Open Access Journal |
| issn | 1657-4206 |
| language | English |
| last_indexed | 2024-12-11T11:20:13Z |
| publishDate | 2014-12-01 |
| publisher | Universidad EAFIT |
| record_format | Article |
| series | Ecos de Economía |
| spelling | doaj.art-1ea2c11060fa4be08b7c1dafe1beae052022-12-22T01:09:12ZengUniversidad EAFITEcos de Economía1657-42062014-12-01183914316310.17230/ecos.2014.39.72066Capital budgeting practices: Empirical evaluation of company practices in the construction sector in ColombiaJulián Ochoa Yepes0Andrés Mauricio Mora Cuartas1Universidad EAFITUniversidad EAFITThe empirical analysis of capital budgeting or investment appraisal is a topic that has been widely studied in developed countries, such as the United States, the United Kingdom, and Canada. The documentation of these practices in emerging countries is scarce. This paper provides some information about current capital budgeting techniques through an empirical study of practices in a group of Colombian companies in the construction industry. In the companies surveyed it was found that 86% of professionals use the most recommended methods in the literature, such as the Internal Rate of Return (IRR) and Net Present Value (NPV), with a preference for the IRR (50% always use it) over the NPV (36% always use it). It was also found that 95% lack knowledge of more sophisticated methods, such as Real Options (OR). Most of the respondents subjectively determine the discount rate that is used for evaluation, indicating the lack of any theoretical justification to determine an appropriate rate.http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/2713Técnicas de flujo de caja descontado, presupuesto de capitalvaloración de inversionesvalor presente neto (VPN)tasa interna de retorno (TIR). |
| spellingShingle | Julián Ochoa Yepes Andrés Mauricio Mora Cuartas Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia Ecos de Economía Técnicas de flujo de caja descontado, presupuesto de capital valoración de inversiones valor presente neto (VPN) tasa interna de retorno (TIR). |
| title | Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia |
| title_full | Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia |
| title_fullStr | Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia |
| title_full_unstemmed | Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia |
| title_short | Capital budgeting practices: Empirical evaluation of company practices in the construction sector in Colombia |
| title_sort | capital budgeting practices empirical evaluation of company practices in the construction sector in colombia |
| topic | Técnicas de flujo de caja descontado, presupuesto de capital valoración de inversiones valor presente neto (VPN) tasa interna de retorno (TIR). |
| url | http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/2713 |
| work_keys_str_mv | AT julianochoayepes capitalbudgetingpracticesempiricalevaluationofcompanypracticesintheconstructionsectorincolombia AT andresmauriciomoracuartas capitalbudgetingpracticesempiricalevaluationofcompanypracticesintheconstructionsectorincolombia |