Sophisticated Capital Budgeting Techniques – A study of the interaction between the degree of sophistication in capital budgeting techniques and investment horizon of Swedish firms

Abstract

This paper contributes to the research regarding capital budgeting techniques and its interaction to the investment horizon of Swedish firms. Prior empirical studies have been unable to establish any clear relationship between the degree of sophistication in capital budgeting practices and investment horizon of a firm. This may depend on the fundamental issue of reliable observation and measurement within this area. The present study, based on data gathered from 67 Swedish firms examines the relationship between the degree of sophistication in capital budgeting techniques and investment horizon of Swedish firms. Using multiple regression analysis and controlling for the corporate characteristics of size, ownership concentration, family ownership and pressure from the stock market, the results were not unlike previous research. It appears to be no significant relationship between the degree of sophistication in capital budgeting and investment horizon of Swedish firms.