The Significance of Corporate Strategy on Capital Budgeting Practices in Private Not for Profit Hospitals in Kenya
Mwangi, Josphat W
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Real investment decisions are not made in a vacuum; they are embedded in a company’s strategy. However, with inadequate capital amount and an ostensibly infinite request for capital investment in the hospital sector ensuring that there is an organized procedure assist firms make informed capital investment decisions. Therefore, using strategic objectives in determination of capital budgeting techniques to be adopted by a firm is a critical part of ensuring sound investment. This study therefore sought to establish the capital budgeting practices applied by Aga Khan University Hospital, Nairobi, given the influence of hospitals strategic agendas as well as other factors that affect the choice of the capital budgeting techniques used. The key objective being to establish whether corporate strategy has an impact on capital budgeting techniques employed by not for profit hospitals. The study was an in-depth descriptive case study of Aga Khan University Hospital, Nairobi. Content analysis was used to analyze data that was collected through structured interviews. The interviews were conducted on twenty of the twenty-seven targeted respondents achieving a response rate of 74%. The data analysis involved familiarization through listening to recordings and re-reading the transcripts, coding and generating themes, charting and finally mapping and interpreting of the data. The study findings indicate that corporate objectives have a significant influence on the choice of capital budgeting techniques at the Aga Khan University Hospital, Nairobi. The research determined that NPV, IRR, PI and Payback Period are the main capital budgeting methods used by Aga Khan University Hospital, Nairobi with the hospital strategic objectives having a strong impact on the choice of this methods. It was also established that Government policies, political environment, technology, human capital availability, funding constraints, interest rates, inflationary conditions, management perception, taxation, nature and criticality of the project and management risk reservation affected the choice of capital budgeting technique used. The study recommends that not for profit hospitals utilize their strategic objectives to determine the capital budgeting techniques employed by their institution. The study also recommends that large and multinational NFPs restructure their organization structure to cut on the bureaucratic processes. In conclusion, it is recommended that the strategic objectives of the NFPs hospital should be considered in tandem with other factors affecting capital budgeting techniques in this institutions.
University of Nairobi
SubjectThe Significance of Corporate Strategy on Capital Budgeting Practices in Private Not for Profit Hospitals in Kenya
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