The revival of zero-based budgeting: Drivers and consequences of firm-level adoptions

Accounting and Finance, forthcoming

Posted: 18 Nov 2021

See all articles by Martin Messner

Martin Messner

University of Innsbruck

Rodney Coyte

University of Sydney Business School

Shan Zhou

The University of Sydney

Date Written: November 8, 2021

Abstract

The paper examines the recent revival of zero-based budgeting (ZBB) in the US. Using archival data, we show that the renewed interest in ZBB was linked to the activities of a hedge fund, 3G Capital, which introduced the practice in newly acquired firms. Other firms picked up the practice, particularly so in some industries, and justified adoption mainly on the basis of expected cost savings. In addition, we show that these adopting firms were smaller than non-adopters, suggesting that less complexity favours adoption. We also find some evidence that they were more strongly leveraged than non-adopters, suggesting a cost discipline effect of debt financing. However, in terms of the consequences of adoption, we do not find evidence for significant cost savings in adopting firms overall, although we find some evidence of significant cost savings among those firms referencing 3G in their SEC filings.

Suggested Citation

Messner, Martin and Coyte, Rodney W and Zhou, Shan, The revival of zero-based budgeting: Drivers and consequences of firm-level adoptions (November 8, 2021). Accounting and Finance, forthcoming, Available at SSRN: https://ssrn.com/abstract=3959581

Martin Messner (Contact Author)

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Rodney W Coyte

University of Sydney Business School ( email )

University of Sydney Business School CBD Campus
Level 17, 133 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9351 8615 (Phone)
+61 2 9351 6638 (Fax)

HOME PAGE: http://sydney.edu.au

Shan Zhou

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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