Exploring the impact of organizational context on budgeting

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Catherine E. Batt ORCID logo, Páll Rikhardsson ORCID logo, Thorlakur Karlsson ORCID logo


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Most organizations use budgeting and describe it as an institutionalized management accounting system, but it is also criticized for being unsuitable in today’s uncertain business environment. This paper explores how sudden changes in organizational context impact the importance of budgeting. Earlier studies have reported less importance given to budgeting following a crisis and a need for more interactive approaches. Our study is based on a survey of CFOs of the 300 largest companies in Iceland, according to the dataset Frjáls Verslun, following the financial crisis of 2008. A total of 191 (63.6%) responded to the survey. The results show widespread use of budgeting, regardless of the size of the organization. The results also show that uncertainty and organizational complexity do not impact the perceived importance of budgeting. Contrary to prior studies, this indicates that budgeting remains an important management tool during a sudden change in the organizational context.

Keywords: Budgeting, Management Control, Financial Crisis, Uncertainty, Iceland

Authors’ individual contribution: Conceptualization — C.E.B. and P.R.; Methodology — C.E.B. and T.K.; Formal Analysis — C.E.B. and T.K.; Resources — C.E.B. and T.K.; Writing — Original Draft — C.E.B. and P.R.; Writing — Review & Editing — C.E.B.; Supervision — P.R. and T.K.; Project Administration — P.R.; Funding Acquisition — P.R. and T.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The Authors would like to thank RANNÍS for funding this project. The Authors would also like to thank Joan Ballantine, Jytte Grambo Larsen, Már Wolfgang Mixa, Inger Johanne Pettersen, Martin Quinn, Carsten Rohde, and Niels Sandalgaard for their valuable comments.

JEL Classification: M10, M20, M41

Received: 23.03.2021
Accepted: 26.07.2021
Published online: 29.07.2021

How to cite this paper: Batt, C. E., Rikhardsson, P., & Karlsson, T. (2021). Exploring the impact of organizational context on budgeting. Corporate Ownership & Control, 18(4), 134–151. https://doi.org/10.22495/cocv18i4art10