The use of a single budget or separate budgets for planning and performance evaluation

Arnold, Markus Christopher; Artz, Martin (2019). The use of a single budget or separate budgets for planning and performance evaluation. Accounting, organizations and society, 73, pp. 50-67. Elsevier 10.1016/j.aos.2018.06.001

[img] Text
Arnold_Artz_The use of a single budget or separate budgets for planning and performance evaluation.pdf - Published Version
Restricted to registered users only
Available under License Publisher holds Copyright.

Download (554kB) | Request a copy

Budgeting has different functions in the firm that are not necessarily congruent with each other but conflict. In many firms, budgets are simultaneously used for both operative planning and performance evaluation. Although Prior literature recommends using different budget levels for different purposes to resolve potential conflicts between these functions, empirical evidence indicates that most firms use a single budget level for planning and performance evaluation. To examine the questions of whether and why firms do so, we analyze potential costs emerging from these budgeting conflicts. We suggest that firms trade off these costs against the behavioral costs of reduced credibility when the performance evaluation budget deviates from the planning budget. We test our hypotheses using survey data from management accounting executives and find evidence for the predicted trade-offs. Moreover, we find that using a single budget level for both purposes at the beginning of the year does not imply using a single budget level at the end of the year as firms often adjust budgets differently for planning and performance evaluation. Our study contributes to the literature by reconciling discrepancies between descriptive empirical practice and recommendations from prior literature about the use of a single versus separate budgets for multiple purposes.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute for Accounting and Controlling
03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute for Accounting and Controlling > Managerial Accounting

UniBE Contributor:

Arnold, Markus Christopher and Artz, Martin

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0361-3682

Publisher:

Elsevier

Language:

English

Submitter:

Lynn Carole Selhofer

Date Deposited:

10 Sep 2019 13:58

Last Modified:

27 Oct 2019 12:55

Publisher DOI:

10.1016/j.aos.2018.06.001

BORIS DOI:

10.7892/boris.133021

URI:

https://boris.unibe.ch/id/eprint/133021

Actions (login required)

Edit item Edit item
Provide Feedback