Capital budgeting decision: evidence from the Lebanese market

Abstract

This study explores techniques used by Lebanese financial managers to evaluate capital budgeting projects. This study investigates whether Lebanese managers use sophisticated and efficient capital budgeting techniques when making their decision to either accept or reject projects. The main hypothesis states that Lebanese managers are using sophisticated and efficient capital budgeting techniques. Data was collected through a questionnaire distributed to 45 Lebanese firms. Only 30 firms were taken into consideration since the other questionnaires were not completed. A frequency analysis was performed on the sample to observe the rate of recurrence of the capital budgeting technique used. In addition, a regression analysis was performed to test whether Lebanese managers are using sophisticated and efficient capital budgeting techniques. The results led to the rejection of the main null hypothesis and to accept the alternative which states that Lebanese managers are using sophisticated and efficient capital budgeting techniques when making their decisions. This result is consistent with main theories which states that decisions should be based on sophisticated capital budgeting techniques in addition to many recent results such as Ryan (2002) survey on 1000 American firms.