Performance Evaluation and Forecasting Functions and the Perceived Value of the Budget
DOI:
https://doi.org/10.14392/asaa.2023160302Keywords:
Budget Functions, Performance Evaluation, Forecasting, Managers' Perceived Value with the BudgetAbstract
Objective: To investigate the association between performance evaluation and forecasting functions and the value perceived by managers concerning the budget, considering jointly the logics of trade-off and the predominance among the budgetary functions.
Methodology: A survey was conducted with a sample of 109 medium and large-sized companies that use budgeting. The data were analyzed using Structural Equation Modeling.
Results: First, the results indicate that the simultaneous use of the budget for performance evaluation and forecasting functions leads to a decrease in the value perceived by managers concerning the budget, signaling the presence of a potential trade-off between these functions. Second, this study also investigated to what extent the predominance of the budget for one of the two functions would mitigate the observed trade-off, but the results were not significant.
Contributions: This research provides evidence contributing to the discussion of the trade-off between performance evaluation and forecasting functions but does not support that the predominance of one function over the other reduces this tension. This outcome adds to the evidence from previous studies. From a practical standpoint, the study shows that these functions, individually, might encourage managers to recognize the importance of the budget, yet it demonstrates a potential trade-off between these functions, with a higher perceived value associated with the performance evaluation function.
Downloads
References
Arnold, M. C., & Gillenkirch, R. M. (2015). Using Negotiated Budgets for Planning and Performance Evaluation: An Experimental Study. Accounting, Organisations and Society, 43, 1–16. https://doi.org/10.1016/j.aos.2015.02.002
Arnold, M., & Artz, M. (2019). The use of a single budget or separate budgets for planning and performance evaluation. Accounting, Organizations and Society, 73, 50-67. https://doi.org/10.1016/j.aos.2018.06.001
Barrett, M. E., & Fraser, L. B. (1977). Conflicting Roles in Budgeting for Operations. Harvard Business Review, July–August: 137–46.
Becker, S. D., Mahlendorf, M. D., Schäffer, U., & Thaten, M. (2016). Budgeting in times of economic crisis. Contemporary Accounting Research, 33(4), 1489-1517. https://doi.org/10.1111/1911-3846.12222
Bedford, D. S., & Speklé, R. F. (2018). Construct validity in survey-based management accounting and control research. Journal of Management Accounting Research, 30(2), 23-58. https://doi.org/10.2308/jmar-51995
Bourmistrov, A., & Kaarbøe, K. (2013). From comfort to stretch zones: A field study of two multinational companies applying “beyond budgeting” ideas. Management Accounting Research, 24(3), 196-211. https://doi.org/10.1016/j.mar.2013.04.001
Brüggen, A., Grabner, I., & Sedatole, K. L. (2021). The folly of forecasting: The effects of a disaggregated demand forecasting system on forecast error, forecast positive bias, and inventory levels. The Accounting Review, 96(2), 127-152. https://doi.org/10.2308/tar-2018-0559
Cassar, G., & Gibson, B. (2008). Budgets, internal reports, and manager forecast accuracy. Contemporary Accounting Research, 25(3), 707-738. https://doi.org/10.1506/car.25.3.3
Churchill, N. C. (1984). Budget choice-planning vs control. Harvard Business Review, 62(4), 150.
Cohen, J. (1988). Statistical Power Analysis for the Behavioral Sciences (2nd edition). Routledge: New York, NY, USA.
Da Luz, I. P., & Lavarda, C. E. F. (2021). Influência do isomorfismo institucional na aceitação do orçamento mediada pelas finalidades de planejamento e diálogo. Revista de Contabilidade e Organizações, 15, e174004-e174004. https://doi.org/10.11606/issn.1982-6486.rco.2021.174004
Defaveri, I. R., de Santi, D. G., & Toigo, L. A. (2019). Relacionando as características e funções do orçamento com a satisfação orçamentária em empresa de consultoria empresarial. Revista Gestão Organizacional, 12(2). https://doi.org/10.22277/rgo.v12i2.4375
Faul, F., Erdfelder, E., Lang, A.-G., & Buchner, A. (2007). G*Power 3: A flexible statistical power analysis program for the social, behavioral, and biomedical sciences. Behavior Research Methods, 39, 175-191. https://doi.org/10.3758/BF03193146
Fisher, J. G., Maines, L. A., Peffer, S. A., & Sprinkle, G. B. (2002). Using budgets for performance evaluation: Effects of resource allocation and horizontal information asymmetry on budget proposals, budget slack, and performance. The Accounting Review, 77(4), 847-865. https://doi.org/10.2308/accr.2002.77.4.847
Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement error: algebra and statistics. Journal of Marketing Research, 18(3), 382-388. https://doi.org/10.1177/002224378101800313
Frezatti, F., Mucci, D. M., & Bido, D. D. S. (2022). Structure of planning and control artifacts and their accuracy in Brazilian family businesses. Brazilian Administration Review, 19. https://doi.org/10.1590/1807-7692bar2022210080
Frezatti, F., Nascimento, A. R. D., Junqueira, E., & Relvas, T. R. S. (2011). Processo orçamentário: uma aplicação da análise substantiva com utilização da grounded theory. Organizações & Sociedade, 18, 445-466. https://doi.org/10.1590/S1984-92302011000300006
Frezatti, F., Relvas, T. R. S., Junqueira, E., Nascimento, A. R. D., & Oyadomari, J. C. (2010). Críticas ao orçamento: problemas com o artefato ou a não utilização de uma abordagem abrangente de análise? Advances in Scientific and Applied Accounting, 3(2), 190-216. Recuperado de http://www.atena.org.br/revista/ojs-2.2.3-06/index.php/ASAA/article/viewFile/1764/1642
Frow, N., Marginson, D., & Ogden, S. (2010). “Continuous” budgeting: Reconciling budget flexibility with budgetary control. Accounting, Organizations and Society, 35(4), 444-461. https://doi.org/10.1016/j.aos.2009.10.003
Hair, J. F., Jr., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2021). A primer on partial least squares structural equation modeling (PLS-SEM). Sage publications, Inc: California, pp. 307.
Haka, S., & Krishnan, R. (2005). Budget type and performance—the moderating effect of uncertainty. Australian Accounting Review, 15(35), 3-13. https://doi.org/10.1111/j.1835-2561.2005.tb00247.x
Hansen, S. C. (2011). A theoretical analysis of the impact of adopting rolling budgets, activity-based budgeting and beyond budgeting. European Accounting Review, 20(2), 289-319. https://doi.org/10.1080/09638180.2010.496260
Hansen, S. C., & Van der Stede, W. A. (2004). Multiple facets of budgeting: an exploratory analysis. Management Accounting Research, 15(4), 415-439. https://doi.org/10.1016/j.mar.2004.08.001
Hansen, S. C., Otley, D. T., & Van der Stede, W. A. (2003). Practice developments in budgeting: an overview and research perspective. Journal of Management Accounting Research, 15, 95–116. https://doi.org/10.2308/jmar.2003.15.1.95
Harman, H. H. (1976). Modern factor analysis. University of Chicago Press.
Hartmann, F. G. (2000). The appropriateness of RAPM: toward the further development of theory. Accounting, Organizations and Society, 25(4-5), 451-482. https://doi.org/10.1016/S0361-3682(98)00036-1
Henri, J. F., Massicotte, S., & Arbour, D. (2020). Exploring the consequences of competing uses of budgets. Australian Accounting Review, 30(4), 257-268. https://doi.org/10.1111/auar.12287
Henttu-Aho, T. (2018). The role of rolling forecasting in budgetary control systems: reactive and proactive types of planning. Journal of Management Control, 29(3), 327-360. https://doi.org/10.1007/s00187-018-00273-6
Hope, J., & Fraser, R. (2003). Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap. Harvard Business School Press, Boston.
Jensen, M. C. (2001). Corporate budgeting is broken—let’s fix it. In: Harvard Business Review, 79(10), 94–101.
Jordan, S., & Messner, M. (2020). The use of forecast accuracy indicators to improve planning quality: Insights from a case study. European Accounting Review, 29(2), 337-359. https://doi.org/10.1080/09638180.2019.1577150
Kruger, S. D., de Togni, L., & Zanin, A. (2022). Usability and functions of the budget in the perception of managers of a company in the metal-mechanical field. Revista Brasileira de Contabilidade e Gestão, 11(21). https://doi.org/10.5965/2764747111212022060
Kruis, A. M., Speklé, R. F., & Widener, S. K. (2016). The Levers of Control Framework: An exploratory analysis of balance. Management Accounting Research, 32, 27-44. https://doi.org/10.1016/j.mar.2015.12.002
Libby, T., & Lindsay, R. M. (2010). Beyond budgeting or budgeting reconsidered. A survey of North-American budgeting practice. Management Accounting Research, 21(1), 56-75. https://doi.org/10.1016/j.mar.2009.10.003
Mannes, S., Frare, A. B., & Beuren, I. M. (2021). Efeitos do uso dos orçamentos estático e flexível na inovação de processos e produtos. Revista de Contabilidade e Organizações, 15, e180829-e180829. https://doi.org/10.11606/issn.1982-6486.rco.2021.180829
Malmi, T., & Brown, D. A. (2008). Management control systems as a package—Opportunities, challenges and research directions. Management Accounting Research, 19(4), 287-300. https://doi.org/10.1016/j.mar.2008.09.003
Matějka, M., Merchant, K. A., & O'Grady, W. (2021). An empirical investigation of beyond budgeting practices. Journal of Management Accounting Research, 33(2), 167-189. https://doi.org/10.2308/jmar-19-010
Marginson, D., & Ogden, S. (2005). Coping with ambiguity through the budget: the positive effects of budgetary targets on managers’ budgeting behaviours. Accounting, Organizations and Society, 30(5), 435-456. https://doi.org/10.1016/j.aos.2004.05.004
Mucci, D. M., Beck, F., & Frezatti, F. (2021). Configurações do processo orçamentário: análise de empresas que atuam no Brasil. Revista de Educação e Pesquisa em Contabilidade (REPeC), 15(1). https://doi.org/10.17524/repec.v15i1.2721
Mucci, D. M., Frezatti, F., & Dieng, M. (2016). As múltiplas funções do orçamento empresarial. Revista de Administração Contemporânea, 20(3), 283-304. https://doi.org/10.1590/1982-7849rac2016140121
Nitzl, C. (2016). The use of partial least squares structural equation modelling (PLS-SEM) in management accounting research: Directions for future theory development. Journal of Accounting Literature, 37(1), 19-35. https://doi.org/10.1016/j.acclit.2016.09.003
Otti, M., Brouwer, H. (2021). Budgeting Revisited. Strategic Finance. Recuperado de https://sfmagazine.com/post-entry/may-2021-budgeting-revisited/
Sivabalan, P., Booth, P., Malmi, T., & Brown, D. A. (2009). An exploratory study of operational reasons to budget. Accounting & Finance, 49(4), 849-871. https://doi.org/10.1111/j.1467-629X.2009.00305.x
Sponem, S., & Lambert, C. (2016). Exploring differences in budget characteristics, roles and satisfaction: A configurational approach. Management Accounting Research, 30, 47-61. https://doi.org/10.1016/j.mar.2015.11.003
Van der Stede, W. A., Young, S. M., & Chen, C. X. (2005). Assessing the quality of evidence in empirical management accounting research: The case of survey studies. Accounting, Organizations and Society, 30(7-8), 655-684. https://doi.org/10.1016/j.aos.2005.01.003
Xu, D., & Meyer, K. E. (2013). Linking theory and context:‘Strategy research in emerging economies’ after Wright et al.(2005). Journal of Management Studies, 50(7), 1322-1346. https://doi.org/10.1111/j.1467-6486.2012.01051.x
Wallander, J. (1999). Budgeting—an unnecessary evil. Scandinavian Journal of Management, 15, 402–421. https://doi.org/10.1016/S0956-5221(98)00032-3
Wagner, J., Petera, P., Popesko, B., Novák, P., & Šafr, K. (2021). Usefulness of the budget: the mediating effect of participative budgeting and budget-based evaluation and rewarding. Baltic Journal of Management, 16(4), 602-620. https://doi.org/10.1108/BJM-02-2020-0049
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Daniel Magalhães Mucci, Franciele Beck, Fábio Frezatti
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Copyright for articles published in the ASAA Journal is held by the author, with first publication rights to the journal. By virtue of appearing in this publicly accessible journal, the articles are free to use, with their own attributions, in educational and non-commercial applications. The ASAA Journal will allow the use of published works for non-commercial purposes, including the right to submit the work to publicly accessible databases. Published articles are the authors' full and exclusive responsibility. There are no submission/publishing charges or fees for processing articles (APC).
