THE IMPACT OF CAPITAL BUDGETING PRACTICES ON FINANCIAL PERFORMANCE OF LEBANESE BANKS

Abstract

Individuals participating in capital budgeting choices are presumed to act rationally while making investments. However, human irrationality may have an impact on actual capital budgeting choices. The primary purpose of this research was to analyze how capital budgeting choices affected the bottom lines of Lebanese financial institutions. The sample for the research consisted of nine different banks in Lebanon. Data was gathered using both original sources and secondary resources. The data covered the years 2015 till 2020. The listed banks' financial statements served as a secondary data source, while questionnaires were used to gather primary data. For the purpose of analysis, we used MS Excel and SPSS. This research shows that capital budgeting methods are used by banks in Lebanon while making investments. In terms of capital planning, net present value was the most used metric. After NPV and IRR came PBP and ARR, with ARR being used the least. Banking institutions in Lebanon are urged to provide their staff with training in capital budgeting techniques after reading this paper. Prioritize initiatives based on their potential for success while you look for external financing. Consider acquiring a blend of conventional and contemporary capital budgeting methods to assist the company decrease the risks of project failure and establish a dedicated department to handle the identification of potential projects and the selection of suitable capital budgeting tools mix.