The Perception of Risk and Uncertainty and the Usage of Capital Budgeting Techniques: Evidence from Public Listed Firms in Malaysia

Department of Finance and Banking
University of Malaya
Kuala Lumpur

mfazilah@um.edu.my

Abstract

This paper presents the findings on the perception of risk and uncertainty and the usage of capital budgeting techniques employed by public listed firms in Malaysia. Most of the firms perceived risk as potential size of loss where the main source of uncertainties comes from changes in government policy. While large companies prefer to use DCF as compared to small companies, pay back period is the most popular model for those who do not use DCF techniques. Lack of competent staff and information were cited as the main reason for not using DCF. Irrespective of size of firms, cost of capital as a source of competitive disadvantage is seen as an important factor in M&A activities rather than replacement expenditure, R&D and compliance investments. Consistent to the findings of other studies, this study shows that companies are more inclined to use CAPM to estimate required return by inves- tors. Overall, the results suggest that as far as perception of risk and uncertainty and the usage of capital budgeting techniques are concerned, theory-practice gap still exists in Malaysia.

Keywords

Citation

Abdul Samad, F. (2009). The Perception of Risk and Uncertainty and the Usage of Capital Budgeting Techniques: Evidence from Public Listed Firms in Malaysia. Jurnal Pengurusan, 29, 3–14.

@article{abdulsamad2009perception,
  title={The Perception of Risk and Uncertainty and the Usage of Capital Budgeting Techniques: Evidence from Public Listed Firms in Malaysia},
  author={Abdul Samad, Fazilah},
  journal={Jurnal Pengurusan},
 

volume={29},
  number={},
  pages={3—14},
  year={2009},
  doi={},
  publisher={Penerbit UKM},
}

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29 (2009) 3 – 14

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