Title: Non-financial criteria in project appraisal methodologies: empirical evidence from Indian companies

Authors: Roopali Batra; Satish Verma

Addresses: Department of Management, I.K. Gujral Punjab Technical University Main Campus, Kapurthala-Jalandhar Highway, Near Pushpa Gujral Science City, Kapurthala 144603, India ' Centre for Research in Rural and Industrial Development (CRRID), Chandigarh, India

Abstract: There is an abundance of literature advocating the growing usage of sophisticated capital budgeting practices in corporate India. However, the qualitative aspects in project appraisal are still disregarded. Our research investigates the extent to which Indian companies incorporate non-financial criteria in their project appraisal practices. In addition it makes a contribution to project appraisal methodologies by presenting a comprehensive framework of factors to be considered in project selection. Based on a survey of 77 listed companies, SWOT analysis, customer market analysis, technical considerations, social considerations and necessity to maintain existing product lines emerged as important non-financial criteria in project appraisal. Gratifyingly, the qualitative criteria are used by almost all companies and only 2.6% of the companies do not use this type of criterion. Furthermore exploratory factor analysis identified technical factors, stakeholders' expectations, financial feasibility, social factors, strategic alignment and external factors as the prime factors affecting project selection. According to the authors' knowledge, this is the first study on the significance of non-financial criteria in project appraisal in a developing country like India.

Keywords: non-financial criteria; project appraisal methodology; investment; capital budgeting; factors; India.

DOI: 10.1504/IJAF.2018.090003

International Journal of Accounting and Finance, 2018 Vol.8 No.1, pp.80 - 102

Received: 21 Jun 2016
Accepted: 24 Oct 2017
Published online: 26 Feb 2018 *

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