Capital Budgeting Practices: A Comparative Study Among Conventional Companies and Startups in India
Abstract
This study was conducted to investigate the capital budgeting practices of conventional companies and startups in India, aiming to identify key differences and similarities in their investment decision-making processes. A comparative approach was adopted, and primary data were collected from a sample of 100 companies, equally divided between conventional companies and startups. Data were gathered through structured questionnaires administered to financial managers and CFOs, assessing the capital budgeting techniques used, such as Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period (PBP), and Profitability Index (PI), along with the importance of non-financial factors like strategic alignment and risk management. The findings revealed that conventional companies favored traditional methods, such as NPV and IRR, which were associated with better financial performance outcomes. In contrast, startups relied more on simpler methods like the Payback Period, though NPV was also used. Significant differences were found between the two groups in their adoption of these techniques, as indicated by the independent t-test results. Panel data regression analysis showed that NPV and IRR had a positive impact on Return on Investment (ROI) and profitability. Principal Component Analysis (PCA) identified three key components influencing capital budgeting decisions: Financial Metrics, Time and Risk Sensitivity, and Non-Financial Considerations. It was concluded that conventional companies focused primarily on financial metrics, while startups emphasized flexibility and non-financial factors, such as market potential and innovation. These results provided insights into the capital budgeting strategies of firms at different stages of development and their impact on financial performance.
How to Cite
Shashi Bala, Jasvir S. Sura, "Capital Budgeting Practices: A Comparative Study Among Conventional Companies and Startups in India", Vol. 3, Issue 11, 25-02-2026, pp. 61-77.
