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Donker, H., Santen, B. and Zahir, S. (2009), “Ownership structure and the likelihood of financial distress in the Netherlands”, Applied Financial Economics, Vol. 19 No. 21, pp. 1687-1696.

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Article

What Determines the Use of Capital Budgeting Methods? Evidence from Swedish Listed Companies

1Department of Trade, Industry and Business, HUI Research and Dalarna University, Stockholm and Borlänge, Sweden

2Department of Trade, Industry and Business, Dalarna University, Borlänge, Sweden


Journal of Finance and Economics. 2014, Vol. 2 No. 4, 101-112
DOI: 10.12691/jfe-2-4-1
Copyright © 2014 Science and Education Publishing

Cite this paper:
Sven-Olov Daunfeldt, Fredrik Hartwig. What Determines the Use of Capital Budgeting Methods? Evidence from Swedish Listed Companies. Journal of Finance and Economics. 2014; 2(4):101-112. doi: 10.12691/jfe-2-4-1.

Correspondence to: Sven-Olov  Daunfeldt, Department of Trade, Industry and Business, HUI Research and Dalarna University, Stockholm and Borlänge, Sweden. Email: sven-olov.daunfeldt@hui.se

Abstract

Purpose: This paper aims to extend and contribute to prior research on the association between company characteristics and choice of capital budgeting methods (CBMs). Design/methodology/approach: A multivariate regression analysis on questionnaire data from 2005 and 2008 is used to study which factors determine the choice of CBMs in Swedish listed companies. Findings: Our results supported hypotheses that Swedish listed companies have become more sophisticated over the years (or at least less unsophisticated) which indicates a closing of the theory-practice gap; that companies with greater leverage used payback more often; and that companies with stricter debt targets and less management ownership employed accounting rate of return more frequent. Moreover, larger companies used CBMs more often. Originality/value: The paper contributes to prior research within this field by being the first Swedish study to examine the association between use of CBMs and as many as twelve independent variables, including changes over time, by using multivariate regression analysis. The results are compared to a US and a continental European study.

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