THE IMPACT OF EFFECTIVE CORPORATE CAPITAL BUDGETING ON FINANCIAL PERFORMANCE OF JORDANIAN FIRMS

Abstract

Corporate capital budgeting has become a major issue in many global corporate scandals. It can be interpreted as an action purposely conducted by managers of a firm to report the financial performance which are not in line with the economic reality of the firm for opportunistic or informative purposes. Opportunistic corporate capital budgeting can cause the quality of published financial performance to deteriorate, while also diminishing the trust that investors have in the financial reports. This study investigated the relationship between the corporate capital budgeting in relation to financial performance (ROA & ROE) in Jordan. The sample of the current study is 1210 firm-year observations on firms listed on the Amman Stock Exchange from 2013 to 2022. To test the hypotheses of the current study, multiple regression analysis using STATA software was employed. The results of this study revealed that a corporate capital budgeting is positively related to financial performance (ROA & ROE). The findings of the current study have implications on investors, regulators, and market participants by affording a considerable indication that the corporate capital budgeting is very crucial in explaining the financial performance.