Alternative reasons to budget, firm and budgetary characteristics, and firm performance

Abstract

This study theoretically develops the exploratory findings from Hansen and Van der Stede (2004), regarding alternative reasons to budget (RtB) in firms. Four operational RtB’s are proposed, which are developed from the two operational RtB’s used by Hansen and Van der Stede (2004). Using a similar theoretical framework to that used in their study, propositions are developed and tested between firm characteristics, RtB importance, budgetary characteristics, RtB benefits and firm performance. The four RtB’s are shown to relate differently to firm and budgetary characteristics. Also, by adopting a more robust path analysis model using Partial Least Squares (PLS) regression and considering budgetary characteristics as intervening and not additive variables, results consistent with and counter to that expressed in prior budget research are found. These findings emphasise the importance of studying alternative RtB’s collectively. They also pose interesting questions for future research to address when considering the relevance of firm and budgetary characteristics to the importance and benefits from alternative RtB’s.