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Usefulness of the budget: the mediating effect of participative budgeting and budget-based evaluation and rewarding

Jaroslav Wagner (Prague University of Economics and Business, Prague, Czech Republic)
Petr Petera (Prague University of Economics and Business, Prague, Czech Republic)
Boris Popesko (Tomas Bata University in Zlin, Zlin, Czech Republic)
Petr Novák (Tomas Bata University in Zlin, Zlin, Czech Republic)
Karel Šafr (Prague University of Economics and Business, Prague, Czech Republic)

Baltic Journal of Management

ISSN: 1746-5265

Article publication date: 2 June 2021

Issue publication date: 20 July 2021

1186

Abstract

Purpose

This paper contributes to budgeting-related literature by investigating whether the participation of operational managers in budgeting, and budget-based evaluations and the rewarding of operational managers, significantly mediate the relationship between budget use for operational management and the perceived usefulness of the budget.

Design/methodology/approach

The paper is based on data gathered from a survey of Czech medium- and large-sized companies from the manufacturing sector. The hypothesised relationships are tested using partial least squares structural equation modelling (PLS-SEM).

Findings

Overall usefulness of the budget, as perceived by principals (top managers), is positively influenced by the scope of budget use, but, more importantly, the positive mediating effects of participative budgeting and budget-based evaluation and rewarding on this relationship are significant and strong.

Research limitations/implications

The subjective perceptions of respondents were investigated with the understanding that they may not represent actual situations in their organisations. Companies with well-functioning budgeting systems were more likely to take part in the research. Regarding satisfaction, the authors studied the perceived usefulness of the budget. Only medium- and large-sized manufacturing companies located in a post-communist country were analysed and generalisations should, therefore, be taken with caution.

Practical implications

The results in the studied sample indicate that satisfaction with budgeting is positively correlated with the rewarding and evaluation of operational managers, and with enabling the participation of operational managers in preparing and updating their budgets.

Originality/value

This research contributes to prior literature on budgeting by investigating the mediating effects of the participation of operational managers in budgeting, and the budget-based evaluation and rewarding of operational managers on the perceived usefulness of the budget by principals in an integrated model using the PLS-SEM approach.

Keywords

Acknowledgements

Funding: This paper is one of the research outputs of the project GA 17-13518S/P403 “Determinants of budgeting and performance measurement systems design and impact of these systems on organizational behavior and organizational performance” registered at Czech Science Foundation.

Citation

Wagner, J., Petera, P., Popesko, B., Novák, P. and Šafr, K. (2021), "Usefulness of the budget: the mediating effect of participative budgeting and budget-based evaluation and rewarding", Baltic Journal of Management, Vol. 16 No. 4, pp. 602-620. https://doi.org/10.1108/BJM-02-2020-0049

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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