The budgeting processes of Czech companies: the role of the ownership structure and foreign capital

Authors

DOI:

https://doi.org/10.24136/oc.2020.031

Keywords:

budgeting, planning, budgeting process, impact of foreign capital

Abstract

Research background: The study investigates the initial phase of budgeting process conducted in corporations. The basic concept correlates with findings in scientific literature that describe budgeting as an inefficient tool, burdened by considerable regulation in the preparation and compilation stages. As a consequence, the majority of academics and practitioners have concluded that producing a budget is merely a formality that minimizes wrinkles on the faces of their initiators, while reaping debatable benefits for managerial control.

Purpose of the article: This paper compares data from the literature with the actual budgetary practices of companies operating in the Czech Republic. The attention was paid to the detailed aspects of the budgeting process, factors affecting the time it takes to prepare a budget, and the impact of ownership structure, especially the role of foreign ownership and foreign capital, on the level of decentralization in the budgeting process.

Methods: The authors examined these topics through a questionnaire completed by 136 respondents, primarily industrial companies based in the country. The subsequent hypotheses were assessed via application of the Z-test.

Findings & Value added: The results presented show that the budgeting practices of the Czech firms are not only influenced by traditional factors (e.g. the size of the company and its given economic sector), but also certain other aspects. Essential facets comprise the ownership structure and the share of foreign capital involved, the latter affecting the extent of autonomy of the business as to the budgetary process. This submitted paper can extend the current theory with new findings on the specific nature of budgeting in post-socialist countries with an open economy and the significant influx of foreign capital.

Downloads

Download data is not yet available.

References

Becker, S. D., Mahlendorf M. D., Schäffer, U., & Thaten, M. (2016). Budgeting in times of economic crisis. Contemporary Accounting Research, 33(4), 1489-1517. doi: 10.1111/1911-3846.12222.

Buganová, K., & Moricová, V. (2017). Innovation of education in risk and crisis management. Turkish Online Journal of Educational Technology, (November Special Issue), 177-182.

Choe, Y., & Kan, Ch. (2020). Budget depreciation: when budgeting early increases spending. Journal of Consumer Research, 47(3), 311-326. doi: 10.5281/zeno do.4039933.

De Wall, A., Hermkens-Janssen, M., & van de Ven, A. (2011). The evolutionary adoption framework: explaining the budgeting paradox. Journal of Accounting & Organizational Change, 7(4), 316-336. doi: 10.1108/18325911111182295.

De With, E., & Dijkman, A. (2008). Budgeting practices of listed companies in the Netherland. Management Accounting Quarterly, 10, 26-36.

Dokulil, J., Dvorský, J., & Popesko, B. (2018). Budgeting and Czech companies: connected concepts or two different worlds? Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration, 26(44), 65-76.

Dugdale, D., & Lyne, S. (2006). Budgeting practice and organizational structure. Research Executive Summaries, 6(4).

Hansen, S. (2011). A theoretical analysis of the impact of adopting rolling budgets, activity-based budgeting, and beyond budgeting. European Accounting Review, 20(2), 289-319.

Hansen, S. C., Otley, D. T., & Van der Stede, W. A. (2003). Practice developments in budgeting: an overview and research perspective. Journal of Management Accounting Research, 15(1), 95-116. doi: 10.2308/jmar.2003.15.1.95.

Hope, J., & Fraser, R. (2003). Beyond budgeting: how managers can break free from the annual performance trap. Boston, Mass.: Harvard Business School Press.

Joshi, P. L., Al?Mudhaki, J., & Bremser, W. G. (2003). Corporate budget planning, control and performance evaluation in Bahrain. Managerial Auditing Journal, 18(9), 737-750. doi: 10.1108/02686900310500505.

Kenno, S. A., Lau, M. C., & Sainty, B. J. (2018). In search of a theory of budgeting: a literature review. Accounting Perspectives, 17(4), 507-553.

Lambovská, M., Rajnoha, R., & Dobrovič, J. (2019). From quality to quantity and vice versa: how to evaluate performance in the budgetary control process. Journal of Competitiveness, 11(1), 53-69. doi: 10.7441/joc.2019.01.04.

Lidia, T. G. (2014). Difficulties of the budgeting process and factors leading to the decision to implement this management tool. Procedia Economics and Finance, 15, 466-473. doi: 10.1016/S2212-5671(14)00484-5.

Libby, T., & Lindsay, R. M. (2007). Beyond budgeting or better budgeting? Strategic Finance, 89(2), 46-51.

Libby, T., & Lindsay, R. M. (2010). Beyond budgeting or budgeting reconsidered? A survey of North-American budgeting practice. Management Accounting Research, 21(1), 56-75. doi: 10.1016/j.mar.2009.10.003.

Lohan G. (2013). A brief history of budgeting: reflections on beyond budgeting, its link to performance management and its appropriateness for software development. In B. Fitzgerald, K. Conboy, K. Power, R. Valerdi, L. Morgan, K. J. Stol (Eds.). Lean enterprise software and systems. LESS 2013. Lecture notes in business information processing, vol 167. Berlin, Heidelberg: Springer.

Lorain, M. A., Domonte, A. G., Sastre Peláez, F. (2014). Traditional budgeting during financial crisis. Cuadernos de Gestión, 15(2), 65-90. doi: 10.5295/cdg. 140480ag.

Neely, A., Bourne, M., & Adams, C. (2003). Better budgeting or beyond budgeting? Measuring Business Excellence, 7(3), 22-28. doi: 10.1108/136830 40310496471.

Neely, A., Sutcliffe, M. R. & Heyns, H. R. (2001). Driving value through strategic planning and budgeting. London: Accenture.

Ostergren, K., & Stensaker, I. (2011). Management control without budgets: a field study of beyond budgeting in practice. European Accounting Review, 20(1). 149-181. doi: 10.1080/09638180903487842.

Pietrzak, Ż. (2013). Traditional versus activity-based budgeting in non-manufacturing companies. Social Sciences, 82(4), 26-37.

Popesko, B., Novák, P., Papadaki, S., & Hrabec, D. (2015). Are the traditional budgets still prevalent: the survey of the czech firms budgeting practices. Transformations in Business & Economics, 14(3C), 42-59.

Réka, I. (2014). New trends in budgeting ? a literature review. SEA - Practical Application of Science, 2(4), 483-490.

SeTin, S. T, Sembel, R. & Agustine, Y. (2019). Budget gaming behavior: evidence in Indonesia manufacturing companies. Journal Keuangan dan Perbankan, 23(2), 258-269. doi: 10.26905/jkdp.v23i2.2945.

Šiška, L. (2016). The contingency factors affecting management accounting in Czech companies. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64(4), 1383-1392.

Titman, S. (2017). Does ownership structure matter? European Financial Management, 23(3). doi: 10.1111/eufm.12120.

Wagner, J. (2014). Performance management and measurement research in the Czech Republic: 1993-2013. In IDIMT-2014: Networking societies ? cooperation and conflict, book series: Schriftenreihe Informatik, 43. Proceedings of 22nd interdisciplinary information management talks (IDIMT) conference. Podebrady, Czech Republic.

Wnuk-Pel, T. & Christauskas, C. (2018). Analysis of operational budgeting practices in Polish and Lithuanian companies. Transformations in Business & Economics, 17(3), 102-124.

Yalcin, S. (2012). Adoption and benefits of management accounting practices: an intercountry comparison. Accounting in Europe, 9(1), 95-110. doi: 10.1080/17 449480.2012.664394.

Zandi, G., Singh, J., Mohamad, S., & Ehsanullah, S. (2020). Ownership structure and firm performance. International Journal of Financial Research, 11(2), 293-300. doi: 10.5430/ijfr.v11n2p293.

Czech Statistical Office, 2015. Statistics & us. Retrieved from https://www.czs o.cz/documents/10180/20555473/3201851503.pdf/42955312-97a9-46e7-9dbb-b0e6b66ea8af?version=1.1.

Downloads

Published

2020-12-30

How to Cite

Dokulil, J., Popesko, B., & Dvorský, J. (2020). The budgeting processes of Czech companies: the role of the ownership structure and foreign capital . Oeconomia Copernicana, 11(4), 779–798. https://doi.org/10.24136/oc.2020.031

Issue

Section

Articles