Title: Capital budgeting practices of SME in Baden-Württemberg: findings of an emperical study

Authors: Bernd Britzelmaier; Ulrike Pöpplow; Lars Andraschko

Addresses: Pforzheim University, Business School, Tiefenbronner Str. 65, 75175 Pforzheim, Germany ' HAPAG – LLOYD AG, Ballindamm 25, D-20095 Hamburg, Germany ' Pforzheim University, Business School, Tiefenbronner Str. 65, 75175 Pforzheim, Germany

Abstract: Companies' success strongly depends on the right investment decisions. This paper sets out to explore the status quo of capital budgeting from SMEs in southwestern Germany. This includes the investment decision making process in context of capital budgeting, with its functional, instrumental and institutional design. Based on a literature review including a previous study evaluation, a survey was developed and, with a final sample size of 73 SMEs, a web-based questionnaire carried out. Main results are that many decisions are based on experience values and investment appraisal techniques are used insufficiently, especially the DCF methods are not applied by a large number of companies. Furthermore, there is a lack of standardisation within capital budgeting, an overview of potential for improvement is provided. Besides this it seems that investment decisions of smaller companies are more often based on intuition. In addition, it is found that the larger the company the more tasks are split within the functional area in order specialise the finance departments.

Keywords: capital budgeting; investment decision making process; small and mid-sized enterprises; SME; south-western Germany; Baden-Württemberg; investment appraisal; non-discounted cash flow; non-DCF; discounted cash flow; DFC.

DOI: 10.1504/IJBG.2020.104958

International Journal of Business and Globalisation, 2020 Vol.24 No.1, pp.78 - 93

Received: 18 Oct 2017
Accepted: 12 Nov 2017
Published online: 10 Feb 2020 *

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