Abstract
Capital budgeting practices have become a fundamental aspect of corporate financial management due to their significant role in guiding long-term investment decisions, optimizing resource allocation, and enhancing organizational performance. Capital budgeting refers to the systematic process of evaluating, selecting, and managing long-term investment projects based on their expected costs, benefits, risks, and contributions to organizational objectives. Manufacturing companies frequently undertake substantial capital investments in plant expansion, machinery acquisition, technology upgrades, research and development, automation, energy infrastructure, and production capacity enhancement. The effectiveness of these investment decisions largely depends on the adoption of sound capital budgeting practices such as Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period (PBP), Profitability Index (PI), Discounted Payback Period (DPP), and sensitivity and risk analyses. In Nigeria, manufacturing companies operate in a dynamic business environment characterized by exchange rate volatility, inflationary pressures, rising production costs, inadequate infrastructure, energy supply challenges, and limited access to long-term financing. These macroeconomic conditions increase the importance of efficient capital budgeting practices in ensuring that scarce financial resources are invested in projects capable of generating sustainable returns and improving corporate performance. Effective capital budgeting is expected to enhance investment efficiency, strengthen profitability, improve operational productivity, and promote long-term competitiveness. Despite its strategic importance, many manufacturing firms continue to encounter challenges such as inaccurate cash flow forecasting, inadequate project evaluation techniques, financial constraints, and weak investment monitoring systems, which may undermine financial performance. Although previous studies have examined investment decisions and corporate performance, empirical evidence regarding the influence of capital budgeting practices on the financial performance of manufacturing companies in Nigeria remains limited and inconclusive. Against this background, this study investigates the influence of capital budgeting practices on the financial performance of manufacturing companies in Nigeria. The study is anchored on Capital Budgeting Theory, Resource-Based View (RBV), and Modern Portfolio Theory. Capital Budgeting Theory posits that firms maximize shareholder wealth by selecting investment projects with positive net present values and superior expected returns. The Resource-Based View argues that effective capital budgeting capabilities constitute strategic organizational resources that enhance operational efficiency, competitive advantage, and long-term financial performance. Modern Portfolio Theory explains that firms improve financial performance by allocating investment resources efficiently while balancing expected returns against investment risks. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between capital budgeting practices and the financial performance of manufacturing companies in Nigeria. The study adopts a quantitative research design using a structured questionnaire administered to finance managers, accountants, chief financial officers, management accountants, internal auditors, investment analysts, project managers, operations managers, and other personnel responsible for capital investment decisions in selected manufacturing companies across Nigeria. A stratified random
