Budget Adjustments and Spending Patterns: A Transaction Cycle View

American Accounting Association, Digital library, 2016

Posted: 24 Dec 2016

See all articles by Akhilesh Chandra

Akhilesh Chandra

University of Akron - The George W. Daverio School of Accountancy

Nirup M. Menon

George Mason University - Department of Information Systems and Operations Management

Birendra K. Mishra

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Date Written: December 24, 2016

Abstract

Organizational- and departmental-level budgeting suffer from various shortcomings, such as asymmetric ratcheting. In this regard, we theorize, and propose, budgeting at the transaction-cycle level for effective budget designs. The transaction-cycle level budget requires management justification for resource assignment to business processes, often spanning multiple departments. The transaction-cycle typology consists of five cycles: production, expenditure, financial, revenue, and human-resources. In order to distinguish among transaction cycles, we use their relative positions within the value chain and technology content in their business processes. As a proof-of-concept, we develop theoretical arguments for asymmetric ratcheting in operating budgets at the transaction-cycle level in hospitals, and empirically examine this phenomenon using longitudinal archival data. Our hypotheses examine budgetary responses to over- and under-spending variances in operating budgets for fixed and variable costs. Our findings suggest that a transaction cycle’s position in the value chain and its technology content play a role in determining asymmetric ratcheting during budgeting. We discuss our contributions from the perspectives of theory and practice of accounting, budgeting, and accounting information systems.

Keywords: transaction-cycle, technology, value chain, operating budget, budget variance, fixed costs, variable costs, partial adjustment model, healthcare, accounting information systems

Suggested Citation

Chandra, Akhilesh and Menon, Nirup M. and Mishra, Birendra K., Budget Adjustments and Spending Patterns: A Transaction Cycle View (December 24, 2016). American Accounting Association, Digital library, 2016, Available at SSRN: https://ssrn.com/abstract=2889625

Akhilesh Chandra (Contact Author)

University of Akron - The George W. Daverio School of Accountancy ( email )

Akron, OH 44325-4803
United States

Nirup M. Menon

George Mason University - Department of Information Systems and Operations Management ( email )

4400 University Drive
MS 5F4
Fairfax, VA 22030
United States

Birendra K. Mishra

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
951-827-7707 (Phone)
951-827-3970 (Fax)

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