Capital Budgeting Techniques: An Empirical Study Based On Contingency Theory

An enterprise can achieve sustained development, and enterprises can maximize the value of goals, which fundamentally depend on the level of capital budgeting techniques. The capital budgeting is a long-term planning and investment management enterprise process. It can be said that the capital budgeting is a process that operators can find good investment opportunities in the process. An enterprise, regardless of the form of organization, should be operated and decided by the enterprise managers. A common management goal is to continuously improve the value of enterprise. To realize the goal of enterprise management, managers not only have a good vision and opportunities, and the most important thing is to make the right and appropriate investment decisions. The basis for decision-making is the capital budgeting. Capital projects generally need years or even decades. Once you made the decision in the past, it will have an impact on the decision now. And the choice will restrict the choice of future. From the long-term effects of Capital projects we can know its strategic nature, and success and gains in the future largely depends on the current capital investment projects of scientific decision-making.The extant accounting and finance theory has, over the past 30 years, recommended discounted cash flow techniques(DCFT) as superior to no discounting techniques to aid in the selection of capital investments(Dean,1951;to Haley&Schall,1979). This literature provides a theory which indicates a firm can improve its performance by choosing assets utilizing DCFT in place of more na?ve techniques such as a payback period or an accounting rate of return. Until recently, the limited empirical research which has attempted to confirm the impact of DCFT on firm performance has been contradictory (Christy, 1966; Klammer, 1973; Kim 1975, 1982). However, a recent empirical study by Haka et al.(1985) corrected some deficiencies in these earlier works. Their study, which was grounded in a theoretical model derived from financial economic theory, concluded that improved firm performance (measured by stock market data)is not significantly associated with the use of DCFT. This paper is based on this background .We study the relevance between Chinese enterprises and capital budgeting, and hopes it can provide effective data, better understand the impact of the current investment decisions of the investment decision-making enterprises, and make the right decision-making plan. On this view, the paper based on enterprise strategy, decentralized or centralized management model, reward structure and the survival period of the project; the diversity and predictability of external environment put forward the hypothesis.1. As the firm's strategy moves from the prospector to the defender, there will be improvement in the firm's relative performance while utilizing DCFT.2.The predictability of the firm's environment is positively related to the firm's relative performance whiles utilizing DCFT.3. As a firm's environmental creases, the firm will experience improved relative performance from utilizing DCI'T.4. As a firm's reward system becomes more supportive, the firm's relative performance while using DCFT will improve.5. The degree of decentralization in the firm's capital budgeting process is positively related to the firm's relative performance while using DCFT.6. When there is a relationship between performance and capital budgeting techniques, the performance will improve while using DCFT.