Uncertainty and budgets: an empirical investigation

Purpose - The purpose of the paper is to report the findings of a study of the relation between perceived environmental uncertainty and the abandonment of traditional annual budgets. Design/methodology/approach - The paper is based on the use of data from a survey among the largest Danish companies. The hypothesized relationships are tested by the use of logistic regression. Findings - The results show no sign of a relationship between perceived environmental uncertainty and the abandonment of traditional annual budgets. Instead, the results show a positive relationship between competition in the environment and the adoption of rolling forecasts. Research limitations/implications - Instead of focusing on the budgeting system in isolation, future research should, to a larger extent, focus on management control systems as a package. Practical implications - The results indicate that a competitive environment could be handled by retaining budgets but supplementing them with rolling forecasts. Originality/value - This paper is among the first to investigate the relationship between environmental uncertainty and the abandonment of traditional annual budgets.