IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 11 NO. 1 2025
DOI: 10.56201/jafm.vol.11.no1.2025.pg219.237

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Capital Appraisal Techniques in Real Assets Investment Decisions by MSMES: A Focus on South-East Zone. Nigeria

Ogbulu, O. M, Udensi, C. E., Okanta, S. U., Uruakpa, P., Onoh, J., Ndubisi, P.

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Abstract

It is generally agreed that MSMEs play vital roles in every economy, and as a result, they remain the focus of policy interventions from both government and international institutions. However, both research and anecdotal evidence point to the fact that the key elements of the MSMEs ecosystem are not given commensurate attention, and this possibly explains the persisting negative narratives about their performance. While finance, infrastructure, and legal requirements are prominent, managerial competence assumes secondary importance. The study focused on the decision-making inclination of MSME operators, especially concerning the use of capital appraisal techniques in decision-making. The study addressed three key objectives which centered on the extent of usage of appraisal techniques, the relationship between adoption of appraisal techniques and organizational performance and the effect of socio-economic factors on the decision of MSMEs to invest in real physical assets. Based on a descriptive survey of 540 from four states in the South-East geo-political zone, viz, Abia, Anambra, Ebonyi, and Imo, the hypotheses were tested with multinomial and ordinal logistic regression. The study's findings showed that the MSME operators use some techniques in making investment decisions but on an infrequent basis. In addition, it was discovered that there is a significant but negative relationship between adopting the techniques and firm profitability. The study, therefore, concludes that despite the manifest benefits of appraisal techniques, their diffusion among MSMEs in the South-East zone is low. This indicates some underlying policy inadequacies and, therefore, calls for a policy review that will give commensurate attention to developing managerial competencies among MSMEs.

capital appraisal techniques, MSMEs, decision-making, investments, real physical assets, business environment

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ACKNOWLEDGEMENT: The funding for the research that generated this paper was
provided by TETFUND under National Research Fund intervention.

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