CAPITAL INVESTMENT PRACTICES IN SRI LANKA: AN EMPIRICAL STUDY

Abstract

With the underlying motivation of filling the gap in empirical evidence of capital investment practices, this study is largely a survey of capital investment practices in Sri Lanka. This research serves the purpose of revealing the actual management practices related to capital investment decisions in Sri Lankan context and provide a research accounts for the upliftment of such practices. Being a survey research, this study focuses on manufacturing industries, and all listed manufacturing companies in the Colombo Stock Exchange. Companies selected for the study were categorized in to three groups: small, medium and large on the basis of turnover and, then differences as to the actual practices among these categories were tested using inferential statistics, in addition to the descriptions given in terms of descriptive statistics. Conceptually, the survey concentrated on two major dimensions of capital investment process: general issues and technical issues of capital investment practices. General issues therein mainly dealt with the interactions between the capital investment process and the overall organizational interface of strategic decision making. Technical issues covered the procedural and evaluative sides of the capital investment process. The study found that sophisticated as well as native capital investment techniques without risk adjustments were widely used by the Sri Lankan companies. On most occasions, there was no statistically significant difference found in company size with respect to the dimensions of the research. On some occasions, it was revealed that there was greater use of theoretically recommended techniques by large and medium companies while almost all companies used none of the sophisticated risk analysis techniques. This survey research, it is believed, will help develop a rational and theoretically valid managerial perspective in capital investment practices at the firm level, which in turn will contribute to the socio-economic development of the nation.

Keywords: Capital investment practices, Capital investment decisions, Capital investment techniques, Survey research

For full Paper: fmscresearch@sjp.ac.lk