An Empirical Investigation of Beyond Budgeting Practices

50 Pages Posted: 20 May 2020

See all articles by Michal Matejka

Michal Matejka

Arizona State University

Kenneth A. Merchant

University of Southern California - Leventhal School of Accounting

Winnie O'Grady

University of Auckland Business School

Date Written: April 23, 2020

Abstract

Some organizations have abandoned traditional annual budgeting and instead use an alternate approach known as Beyond Budgeting (BB). Our study presents the results of an exploratory analysis comparing 80 organizations that have implemented at least some of the BB practices to a group of 121 organizations that have not. First, we find that BB organizations tend to use

(i) high levels of decentralization,

(ii) flexible resource allocations without fixed timelines,

(iii) relative target setting, and

(iv) weak individual incentives.

Second, we find evidence suggesting that many BB implementers find it difficult to reduce the reliance on a fixed annual budget for decision making and on financial performance measures for performance evaluation. Third, we find that the likelihood and scope of BB implementation is negatively associated with the importance of long-term investment coordination. Finally, we examine whether combinations of various management control practices affect the likelihood of BB implementation, management control effectiveness, or control system gaming but find only weak interaction effects and associations among practices.

Keywords: Beyond Budgeting, Management Control, Planning, Performance Evaluation, Incentives

Suggested Citation

Matejka, Michal and Merchant, Kenneth A. and O'Grady, Winnie, An Empirical Investigation of Beyond Budgeting Practices (April 23, 2020). Available at SSRN: https://ssrn.com/abstract=3583682

Michal Matejka (Contact Author)

Arizona State University ( email )

Tempe, AZ 85287-3706
United States
480-965-7984 (Phone)

Kenneth A. Merchant

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States
213-740-4842 (Phone)
213-747-2815 (Fax)

Winnie O'Grady

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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