The capital budgeting evaluation practices (2004) of building contractors in Hong Kong

This paper reports the investigation results of capital budgeting evaluation practices of Hong Kong building contractors. The survey aims to identify the popularity of various techniques for capital budgeting evaluation and to measure the changes of the practices longitudinally by comparing the results of the current study (2004) with those of the similar surveys conducted in 1994 and 1999. The current survey results revealed that the “formal financial evaluation” was the most popular technique for capital budget evaluation. The “payback period” was the mostly used investment appraisal technique. For risk appraisal techniques, “shortening payback period” occupied the first position. The “planning programming” remained as the most popular management science technique. Moreover, a comparison of the practices of large contracting firms was carried out to view the changes over the last 10 years. The results showed that the practice of capital budget evaluation was emphasized. The popularity of employing investment appraisal and risk analysis techniques was dropping. In addition, the capital budgeting evaluation techniques examined were fitted into a discriminant function analysis (DFA), which allowed contracting firms to be classified in accordance with their predominant characteristics in the practices. The classification result was 89.1% of all cases were correctly classified.