Perceived Environmental Uncertainty, Rolling Budgeting, And Budgetary Slack

On the one hand, Environmental uncertainty has produced and promoted rollingbudget. On the other hand, rolling budget can make the enterprises adapted toenvironmental uncertainty. Besides normative researches, however, there are fewempirical researches on the relation of environmental and rolling budget. Therefore,the paper tries to test the hypothesis that rolling budget is necessary to the enterpriseswhen environmental uncertainty is greater. In addition, because there are adverseselection and moral hazard, budgetary slack is an ordinary phenomenon. There aretwo types of budgetary slack. A manager can produce slack when he works out andundertakes the budget program. The paper supports that rolling budget reducesinformation asymmetry and opportunistic behavior. So, it needs to be tested thatrolling budget contributes to reduce slack. Besides, environmental uncertainty canproduce budgetary slack by some indirect factors. Rolling budget can reduce thesefactors. Therefore, when environmental uncertainty is great, it needs to be tested thatrolling budget can decrease the tendency of a manager that produces slack when heworks out and undertakes the budget program.Based on the above analysis, the paper has made four hypotheses: whenenvironmental uncertainty is greater, rolling budget is necessary to the enterprises;rolling budget can decrease the tendency of a manager to produce slack when heworks out the budget program; rolling budget can decrease the tendency of a managerto produce slack when he carries out the budget program; when environmentaluncertainty is great, rolling budget can reduce slack when a manger works out andundertakes the budget. The research uses the Likert Scale to design the questionnaireand asks MBA students. In order to test these hypotheses, the paper has tested thedates and explained the related results by multivariate regression model. Therefore,the paper can help to empirically explain the relation of environmental uncertainty,rolling budget and budgetary slack.