Operation

Vol. 4, No. 1

International Journal of Business and Management

Do We Need to Think More about Small Business Capital Budgeting?

Md. Mohan Uddin (Corresponding author) School of Business United International University H-80, R-8/A, Dhanmondi, Dhaka 1209, Bangladesh Tel: 88-017-1308-1780 E-mail: mohanuddin@yahoo.com

Abu Zakir Md. Rasel Chowdhury School of Business United International University H-80, R-8/A, Dhanmondi, Dhaka 1209, Bangladesh Tel: 88-02-8821-466

Abstract

E-mail: rasel0608@yahoo.com

Capital budgeting is one of the most important areas of finance literature. This paper discusses whether the capital budgeting theory of large business is well applicable for the small ones or not. If it is not, further development of theory becomes necessary. This paper conducted detail analysis of the reasons why the development is necessary. Followed by the analysis of some theoretical and empirical studies, this paper suggests specific factors to consider in future researches on capital budgeting theory for small businesses.

Keywords: Small business, Capital budgeting, Investment decision 1. Introduction

Capital budgeting is one of the most important areas of finance literature. The decision of capital budgeting, or the allocation of fund in assets for a long term, is obvious for both the large and small business. Existing theory of capital budgeting explains the investment decision-making pattern of large businesses very well. This paper discusses whether the capital budgeting theory of large business is well applicable for the small ones or not. If it is not, further development of theory becomes necessary. Followed by the analysis of some theoretical and empirical studies, this paper suggests specific factors to consider in future researches on capital budgeting theory for small businesses. Understanding the pattern of capital budgeting in small businesses is important. Small business is a significant portion of total businesses in an economy. Also, small...