Abandonment of Capital Investments and Survival of Small and Medium Enterprises: Evidence from Nigeria

This paper presents empirical evidence on the impact of abandonment of capital investments on the survival of small and medium enterprises (SMEs) in Nigeria. It employs mixed methodological framework to question the extent to which abandonment of capital investments affects the performance of SMEs in five districts in Lagos. The study adopted survey inferential design. A total of 250 questionnaires were administered to different sets of enterprises, out of which 220 valid responses were received representing 88 per cent. Moreover, judgmental sampling technique was adopted for the purpose of this study. To validate or give further support to the results from specific data sources, triangulation method was used. This method includes both qualitative and quantitative phases. Content validity was adopted. Data gathered from the questionnaire were analysed with the aid of descriptive statistical techniques (such as standard deviation and arithmetic mean) and inferential statistical techniques (Regression analysis and ANOVA). Furthermore, multivariate analysis of factor analysis and its constituent tests were equally employed. Findings related to the study clearly show that the performance of SMEs is characterised by numerous problems including: lack of proper and effective capital budgeting mechanism, failure to access loan, lack of funds, strict banking policies, unethical business practices, lack of stable business policy, among others. The study also discovers that poor capital budgeting practice impacts on the survival of SMEs in Nigeria. The main contribution of this paper to knowledge lies in capital budgeting decision and abandonment option. This has strengthened our understanding that abandonment of capital investments is a critical factor in explaining SMEs survival in Nigeria.