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To modernize budgeting system is a challenge issue in many developing countries. To some scholars (Schick, 1998a, 1998b; Ma, 2009a), developing countries must first put into place basic budgetary controls before moving to more advanced models of budgeting. This approach of “basic first,” however, is questioned by others (e.g., Andrew, 2006). Drawing on China's recent budget reforms, this essay reconfirms the validity of the “basics first” approach. In China, budget reform since 1999 has begun to install budgetary controls for state finance, leading to an enhancement of budgeting capacity and financial accountability. However, governments at the same time have begun to be plagued by the unexpected problem of delays in spending and the accumulation of significant underexpenditures. Contrary to what many people may believe, we contend that this somewhat odd problem arises not because the new budgeting system has exercised too much control but rather because the new system is not yet effective in exerting budgetary controls.

This study examines how two important situational factors (corporate diversification and business unit strategy) and two elements of a firm’s administrative system (accounting‐based budgetary controls and associated incentives) affect the presence of slack in business unit budgets in diversified firms. The relationships among these variables are established by building on theories from organizational economics, the information‐processing view of organizations, and organizational behavior. Data are collected from 37 firms and 153 business units within these firms. The main results indicate: that corporate diversification is positively associated with slack in business unit budgets; and that tight budgetary controls and high‐powered incentives effectively curtail such slack. However, diversification does not seem to drive corporate managers to rely more on these systems to reduce higher budgetary slack associated with diversification. This suggests: that diversified firms employ a conscious strategy of slack at the business unit level to reduce information‐processing needs at the top; or that the design of the internal management control system is a function of factors other than corporate diversification. With respect to the latter explanation, the results indicate that business units that pursue a differentiation strategy receive less tight budgetary controls, which leaves them with the necessary slack to effectively pursue the critical success factors on which their strategies are built.

This paper aims to investigate the emergence of the enabling characteristics of new budgetary practices and their implications for the role of controller.

The longitudinal perspective of this qualitative case study is based on interviews of controllers and managers involved in budgetary work. This study monitored the four enabling characteristics of management control, namely, repair, internal transparency, global transparency and flexibility (Adler and Borys, 1996), related to the new budgeting practices in one global paper company.

The findings of the study demonstrate that the implementation of rolling forecasting was a major attempt at “repair” to remedy the incompleteness of accounting information, which made controllers experts in producing and delivering more realistic forward-looking information in the organization. The increasing internal and global transparency of new budgetary practices enabled controllers at various levels of organization to develop new competences, which helped controller network to build a holistic view of the totality of control and supply more relevant information in organization. Moreover, the inherent flexibility of the system was a major condition for improving organizational effectiveness in budgetary work. However, the study shows that the controller’s attitude towards enabling formalization is not necessarily positive if the system is not aligned with professional mindset and competence.

This study adds to the understanding of the complementarity between new developments of budgeting and controller role by addressing the enabling uses of management control systems, which have the potential to enhance the controller role change.

Prior research suggests that goal setting with an emphasis on accurate and tight budget targets may influence the extent of subordinates' performance. This study, however, argues that such goal setting alone is not sufficient. The implementation of other accounting controls is needed before improved performance is possible. Specifically, this study investigates: (i) if budgetary performance is increased only when an emphasis on accurate and tight budget targets is complemented with a high extent of cost control; and (ii) if these effects are found only for the production function, but not for the marketing function. The results, based on a sample of 104 senior Australian managers, support a significant two‐way interaction between an emphasis on tight budget targets and cost control affecting budgetary performance. Budgetary performance is high only when both emphasis on tight budget targets and cost control are high. These results are applicable to both the production and marketing functions.

Responses to environmental uncertainty have included designating marketing units to interface with the environment to enable manufacturing units to operate in conditions approximating certainty. If buffering is effective, the impact of environmental uncertainty should be lower and conditions may be more suitable for a greater reliance on budgetary control in manufacturing than in marketing departments. The objectives of this study are to first, assess if there is a difference in the level of environmental uncertainty between these functions. Second, to evaluate if the relation between reliance on budgetary control and unit performance is influenced by departmental function. Third, since function and environmental uncertainty are unlikely to be perfectly correlated, if environmental uncertainty influences that relation. The results suggest that there is no difference in the level of environmental uncertainty or reliance on budgetary control between manufacturing and marketing departments. Furthermore, the findings suggest that reliance on budgetary control is no more effective in enhancing performance in either unit category. On relaxing the presumption that function proxied for environmental uncertainty, it was found that reliance on budgetary control is more effective in enhancing performance in conditions of low rather than high environmental uncertainty.

Prior studies on the interactive effects of performance evaluative style and budgetary participation on managers' budgetary performance have overlooked several important issues. First, the moderating effects of organisational commitment have largely been overlooked. Since managers, who are highly committed to their organisations, are likely to pursue their organizations' goals much more intensely than managers who are not committed to their organisations, the effects of performance evaluative style and budgetary participation on the budgetary performance of these two groups of managers are likely to differ. Second, prior studies in this research area have concentrated mainly on the manufacturing sector. The services sectors have received relatively little attention. Third, differences between privately owned service organisations and publicly funded service organisations and their effects on performance have also not been considered. To address these gaps in the literature, this study investigates the three‐way interaction between reliance on financial measures for performance evaluation, budgetary participation and organisational commitment affecting budgetary performance in the health services sector. Based on a sample of 170 managers, the results indicate that highly committed managers react very differently to reliance on financial measures for performance evaluation and budgetary participation from lowly committed managers. Differences were also found between managers from the privately funded service organisations and those from the publicly funded service organisations.

This paper seeks to extend the understanding of how formal management control systems (MCSs) contribute to the construction of performance management systems (PMSs) in the French higher education (HE) sector.

Empirical data are gathered both at the global level and at the local (university) level through an in‐depth case study. This allows a dynamic multi‐level analysis based on a neo‐institutional framework.

This article shows how formal MCSs contribute to the institutionalisation of a wider PMS at the global level of the HE sector. The social context then has a determining influence on universities, through the diffusion of values and norms drained by formal MCSs, calling into question the effectiveness of the autonomy supposed to be given to universities under the new PMS. Moreover, within universities, the complex interactions between MCS and PMS resulting from learning, political interactions and conflicts of values, lead to still uncertain outcomes.

The paper focuses on one main case‐study, which is still undergoing change. Analysis could be reinforced by further longitudinal and comparative research.

Steering organisations within a framework where the State defines strategic priorities requires both appropriate performance indicators and a dialogue allowing objectives to be shared at both the social and local levels.

Institutionalisation of MCSs and accountability are discussed in the specific French context of cultural centralisation.

The use of accounting to help apply the principles of scientific management to business affairs is associated with the adoption of standard costing and budgetary control. This first British industry‐based study of the implementation of these calculative techniques makes use of the case study research tool to interrogate archival data relating to leading iron and steel companies. We demonstrate the adoption of standard costing and budgetary control early on (during the inter‐war period) by a single economic unit, United Steel Companies Ltd, where innovation is attributed to the engineering and scientific background and US experiences of key personnel. Elsewhere, significant management accounting change occurred only with the collapse in iron and steel corporate profitability that began to become apparent in the late 1950s. The process of accounting change is addressed and the significance for our study of the notions of evolution and historical discontinuity is examined. The paper is contextualised through an assessment of initiatives from industry‐based regulatory bodies and consideration of the economic circumstances and business conditions within which management accounting practices were the subject of radical revision.

This paper examines the effectiveness of the reliance on a leader’s reputation as an informal control tool to mitigate subordinates’ budgetary slack. In addition, it seeks to explain whether this relationship is mediated by subordinates’ truthfulness in revealing their private information.

A laboratory experiment was conducted involving 60 undergraduate business students who participated in the experiment. A 1 × 2 between-subjects design was employed for the experimental study. Each subject assumed the role of a production manager responsible for setting a budget target. The experimental task employed involved a simple decoding task adapted from Chow (1983).

The results of this study indicate that budgetary slack is lower when a leader’s reputation is favourable than when it is unfavourable. In addition, it is found that subordinates’ truthfulness in revealing private information fully mediates the relationship between a leader’s reputation and budgetary slack.

This paper extends the limited literature on the reliance of informal controls in mitigating budgetary slack by examining a leader’s reputation as an informal control. The findings of this study provide important implications for the design of effective management control systems.

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.