Comparative synthesis reveals persistent divergence from net present value across global corporate finance practices, highlighting substantial institutional variation and severe geographic survey...
Corporate finance textbooks converge on a single normative answer to the capital budgeting problem: firms should rank and accept projects using Net Present Value (NPV), because NPV alone correctly aggregates the time value of money and the magnitude of value created. Five decades of field surveys, beginning with Graham and Harvey's (2001) landmark study of U.S. Chief Financial Officers, show a persistently different empirical picture. Internal Rate of Return (IRR) and, in many countries, the simple Payback Period rule remain co-dominant or outright dominant decision criteria. This monograph does not run a new primary survey. Instead, it performs the synthesis that the dispersed country-level literature has not yet produced: it collects roughly thirty published field studies spanning North America, Western and Central-Eastern Europe, East Asia, South Asia, Oceania, Southern Africa and Latin America, organizes them into a common comparative skeleton, and asks a single organizing question — for which countries, and under which institutional conditions, was IRR, NPV, or Payback the more relevant criterion in practice? Building on this synthesis, the book proposes an original secondary artifact, the Institutional Capital Budgeting Index (ICBI), which scores each covered country-study on its distance from the textbook NPV consensus as a function of four recurring institutional correlates identified across the literature: capital market depth, legal origin and investor protection, average CFO financial education, and typical firm size/ownership concentration in the sampled population. The exercise is explicitly conceptual-synthetic: the ICBI is a transparent recombination of already-published percentages, not a new empirical estimate, and every score is traceable to a cited source. The clearest finding of the synthesis is not about any single country — it is about the map itself: capital budgeting technique choice has been surveyed intensively in the United States, Western Europe, Japan, Australia and, more recently, Central-Eastern Europe and parts of Asia, while Latin America has exactly one region-wide survey (Maquieira, Preve and Sarria-Allende, 2012, covering seven countries but explicitly excluding Brazil) plus a handful of single-country Brazilian studies, and large parts of Sub-Saharan Africa and the Middle East remain essentially unsurveyed. The book closes by arguing that this asymmetry, not any single technique-choice finding, is the most policy-relevant gap in the literature, and sets out a concrete research agenda for closing it. Use of Artificial Intelligence: this manuscript was produced with the assistance of a large language model (Claude, Anthropic) for literature synthesis support, drafting, and editorial structuring, under the direct supervision, verification, and final authorship responsibility of the named author. All cited findings were checked against the original published sources listed in the References section before inclusion. No primary data was collected, simulated, or fabricated for this work; the Institutional Capital Budgeting Index presented in Part III is explicitly and transparently a secondary recombination of previously published percentages, not new empirical evidence.
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Alfredo Merlet (2026) studied this question.
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