Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 57: What Determines the Use of Capital Budgeting Methods? Evidence from Swedish listed companies

Sven-Olov Daunfeldt () and Fredrik Hartwig
Additional contact information
Sven-Olov Daunfeldt: HUI Research, Postal: Regeringsgatan 60, 103 29 Stockholm, Sweden and, Department of Economics, Dalarna University, Borlänge, Sweden,
Fredrik Hartwig: University of Gävle, Postal: Department of Education and Business, University of Gävle, Gävle, Sweden

Abstract: The choice of capital budgeting methods used by companies listed on the Stockholm Stock Exchange (SSE) is examined using multivariate regression analysis on questionnaire data from 2005 and 2008. Both recommended and non-recommended methods are found to be commonly used, with large companies using capital budgeting methods more frequently than small firms. The choice of capital budgeting methods is also influenced by leverage, growth opportunities, dividend pay-out ratios, the choice of target debt ratio, the degree of management ownership, foreign sales, industry, and individual characteristics of the CEO. The total use of capital budgeting methods is lower in Swedish companies compared to U.S. and continental European companies.

Keywords: Investment decisions; project valuation; capital budgeting techniques; Swedish listed companies.

JEL-codes: G31

37 pages, February 16, 2012

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