Survey Evidence of Capital Budgeting Practices in Turkey

H. Kent Baker, Erhan Kilincarslan, Alper Arsal

Research output: Contribution to journalArticlepeer-review


This study uses a survey approach to investigate the capital budgeting practices of non-financial Borsa Istanbul (BIST) 100 Index companies after Turkish authorities implemented major economic and structural reforms. The results reveal that Turkish managers strongly prefer net present value followed by payback period, internal rate of return, and accounting rate of return techniques to evaluate investment opportunities. They generally measure project risk individually by adjusting both the discount rate and cash flow and by mainly relying on sensitivity analysis followed by judgment. The findings illustrate that respondents estimate the weighted average cost of capital using market weights for assessing projects of average riskiness. They also indicate that their firms have a target debt ratio. Overall, the survey findings show that Turkish managers use systematic, analytical, and thorough investment appraisal approaches coupled with sound judgment after the Turkish capital markets underwent major reforms.
Original languageEnglish
JournalQuarterly Journal of Finance and Accounting
Publication statusAccepted/In press - 28 Jan 2024

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