Uncertainty and budgets: an empirical investigation

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.

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.

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.

Instead of focusing on the budgeting system in isolation, future research should, to a larger extent, focus on management control systems as a package.

The results indicate that a competitive environment could be handled by retaining budgets but supplementing them with rolling forecasts.

This paper is among the first to investigate the relationship between environmental uncertainty and the abandonment of traditional annual budgets.