The Capital Budgeting Behaviour and Corporate Characteristics of Capital‐constrained Firms

This paper addresses (1) the nature and pervasiveness of organisational constraints, frnancial and otherwise, on investment, and (2) the corporate characteristics and capital budgeting behaviour of capital‐constrained firms for a sample of 126 UK companies. The results indicate that corporate size, risk and profitability are important corporate characteristics in this regard, and that financially‐constrained firms tend to adopt naive capital budgeting methods in resolving the capital rationing problem.