MISSING LINKS IN THE APPLICATION OF CAPITAL BUDGETING IN THE INFORMAL SECTOR (2000 TILL DATE)

MISSING LINKS IN THE APPLICATION OF CAPITAL BUDGETING IN THE INFORMAL SECTOR (2000 TILL DATE)

ABSTRACT

This research is an in-depth study of the impact of risk on capital budgeting decisions of some selected companies in Nigeria. There seems to be a great difference between the theoretical aspect of capital budgeting and the actual practice. The central issue is that not enough effort has been made to integrate both the theoretical knowledge and actual practice. The data for study were collected from primary and secondary sources. The primary data was collected from interviews, questionnaires and observations while secondary data were collected from textbooks, journals etc. The analytical approach adopted includes the frequency and percentage distribution analysis. The chi –square method was also used in testing the hypotheses specifically formulated for the study. From the study it was found out that: The practice of capital budgeting in companies studied was not in line with the theoretical models postulated, the decision making process of the companies did not depend on the present micro-economic and government policies alone, and thereby not solely affected by it, Well-qualified management manpower can improve the success and growth of a firm. Based on the outcome of the study, the researcher recommended, among others, some effort to harmonize theoretical proposition of the academic community and actual practice applied by practicing managers. Apparently, both sides, the academic and field men are talking to themselves rather than to each other. What is needed is to develop the means whereby the veritable fruit of research and studies can be applied. If this is done, the overall ability of firms with reference to capital budgeting decision and risks will improve tremendously for the specific benefit of the relevant firms and the entire society at large.