Impact of Appraisal Techniques on Investment Returns A Survey of Institutional Investors.

Soka, Ignas Marco (2020) Impact of Appraisal Techniques on Investment Returns A Survey of Institutional Investors. Masters thesis, The Open University of Tanzania.

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Abstract

This study examined the impact of choice of investment appraisal technique on investment returns of institutional investors in Tanzania. This examination involved assessing factors that determine the choice of capital budgeting technique. The study assessed how the use of sophisticated investment appraisal technique impacts investment returns and lastly various investment appraisal practices were evaluated by this study. The study used the survey strategy by disseminating questionnaire to CFOs, investment managers and officers of different institutional investors and a total of 88 questionnaires were collected from the targeted respondents who were sampled using purposive sampling technique. The findings from ordinary least squares multiple regression analysis revealed that CFO’s experience and size of the project were the only factors that significantly influence the choice of investment appraisal technique. The Pearson Correlation results showed that firm size and CFOs experience have significant relationship with the choice of investment appraisal technique. The study also found through Chi Square test; a significant association between capital budgeting sophistication and project performance. Value are the most commonly methods of capital budgeting used by institutional investors and some combine these methods. Some institutional investors make use of simulation such as scenario testing, sensitivity analysis to analyze projects but the application is still limited. The study recommends that institutional investors should use well experienced CFOs to improve investment analysis. Institutional investors should also improve the use of computer software for simulation and due diligence in defining and formulating projects. Keywords: Techniques, Investment Returns, Institutional, Investors.

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