Exploring the Influence of Global Economic Cycles on Corporate Capital Budgeting and Investment Planning

Posted: Jul 16, 2023

• Levi Lee
• Olivia Adams
• Sarah Miller

Abstract

The intricate relationship between global economic cycles and corporate investment decisions represents a critical yet underexplored dimension of financial management. Traditional capital budgeting methodologies have predominantly focused on firm-specific factors and static economic assumptions, largely overlooking the dynamic nature of global economic fluctuations. This research addresses this gap by developing a comprehensive framework that integrates macroeconomic cycle analysis with corporate capital allocation processes. The conventional approach to capital budgeting, rooted in discounted cash flow analysis and net present value calculations, has proven inadequate in capturing the complex interplay between economic cycles and strategic investment timing. Our study proposes a paradigm shift toward dynamic capital budgeting that explicitly incorporates economic cycle awareness as a fundamental component of investment decision-making.