Factors determining the selection of capital budgeting methods in companies operating in Poland
Factors determining the selection of capital budgeting methods in companies operating in Poland

Summary/Abstract: The paper aimed to explore the extent of the use of capital budgeting methods and also factors determin-ing their selection in companies operating in Poland. The study fills the gap in the literature regarding capital budgeting practices by verifying two hypotheses: H1, stating that the diffusion of capital budget-ing methods in companies operating in Poland is similar to other Central and East European (CEE) coun-tries and lesser than in more developed countries, and H2, stating that the type of a company’s activity, equity capital origin, company size and magnitude of capital expenditure budget is associated with capital budgeting method (CBM) selection. The research carried out enabled Hypothesis 1 to be verified partly positively, meaning that the majority of companies use: NPV, sensitivity analysis, scenario analysis and formalization of investment appraisal. The diffusion of CBM in Poland is therefore similar to other CEE countries and lesser than in more de-veloped countries, e.g. the USA or UK. The study results also enabled Hypothesis 2 to be verified partly positively, meaning that: the large size of a company’s capital expenditure budget and company size have a positive association with the use of 6 methods respectively, foreign ownership has a positive association with the use of 5 methods and the company’s activity is associated with the use of 1 method. The study results also enabled Hypothesis 2 to be verified partly positively meaning that the use of two capital budgeting techniques based on discounted cash flows (together IRR and NVP) significantly increases when a company has foreign ownership and when the capital expenditure budget is large. Other tested independent variables (type of main activity and company size) show no significant association with the use of capital budgeting appraisal methods based on discounted cash flows.

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