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

20 Pages Posted: 16 Mar 2011

See all articles by Bo-Gran Ekholm

Bo-Gran Ekholm

affiliation not provided to SSRN

Jan Wallin

Hanken School of Economics

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.

Keywords: fixed budgets, flexible budgets, exogenous uncertainty, endogenous uncertainty, strategy, real options, structural equation modelling, partial least squares (PLS)

Suggested Citation

Ekholm, Bo-Gran and Wallin, Jan, The Impact of Uncertainty and Strategy on the Perceived Usefulness of Fixed and Flexible Budgets. Journal of Business Finance & Accounting, Vol. 38, Nos. 1-2, pp. 145-164, 2011. Available at SSRN: https://ssrn.com/abstract=1786247 or http://dx.doi.org/10.1111/j.1468-5957.2010.02228.x

Bo-Gran Ekholm

affiliation not provided to SSRN

No Address Available

Jan Wallin (Contact Author)

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
Finland

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