The Impact of Uncertainty and Strategy on the Perceived Usefulness of Fixed and Flexible Budgets

Authors

  • Bo-Göran Ekholm,

    1. The authors are respectively, Professor of Accounting at Hanken School of Economics, Helsinki, Finland, and Professor of Accounting at Hanken School of Economics, Vaasa, Finland. They wish to thank. Andrew W. Stark (editor), and the anonymous referee for their insightful comments on a previous version of the paper.The usual caveat applies.
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  • Jan Wallin

    Corresponding author
    1. The authors are respectively, Professor of Accounting at Hanken School of Economics, Helsinki, Finland, and Professor of Accounting at Hanken School of Economics, Vaasa, Finland. They wish to thank. Andrew W. Stark (editor), and the anonymous referee for their insightful comments on a previous version of the paper.The usual caveat applies.
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Address for correspondence: Jan Wallin, Professor of Accounting, Hanken School of Economics, PO Box 287, FI-65101 Vaasa, Finland.
e-mail: jan.wallin@hanken.fi

Abstract

Abstract:  It has been claimed that the traditional annual budget is a dysfunctional management instrument and that flexible budgets, such as rolling budgets, should be used instead. However, empirical research has produced conflicting results. The results of the present study indicate that environmental uncertainty has a significant negative association with the perceived usefulness of traditional annual budgets, whereas there is no indication of a significant association with flexible budgets. By contrast, there is a significant positive association between accentuation of strategy and appreciation of both types of budget. There is also evidence of a positive association between the perceived usefulness of traditional annual budgets and the perceived usefulness of flexible budgets, supporting prior findings that these budgets are seen more as complements than rivals.

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