Research Proposal

Topics: Budget, Budgets, United Kingdom budget Pages: 8 (2323 words) Published: May 19, 2013
Research Proposal|
Experiencing financial planning change with old institutional theory: A case study of a Chinese SOE, April 2013-August 2013| |
1,850 words, 9 pages|

Experiencing financial planning change with old institutional theory: A case study of a Chinese SOE, April 2013-August 2013

1. Introduction and purpose
While the new trend in international academics is passionate about advocating beyond budgeting approach, in one of the most powerful emerging giant, China, predominant corporations are still in the early phase of exploring the thorough implementation of traditional budgets. It is because of this lag perhaps, that little attention has been directed to the development of financial planning system in China from global researchers. What’s more, little credible literature could be found on explaining this progressing process, even from Chinese local researchers.

To fill in the gap, this project tries to present how the practices of and changes in financial planning system adopted by a Chinese SOE reflect those debates over the usefulness of traditional budgets, which ultimately lead to those so-called advanced budgeting approaches. In particular, this dissertation will address following two aspects: 1) How does the company evaluate its own financial planning system? Are benefits and shortcomings identified by the company consistent with relevant literature? 2) What changes have been made or planned to be made towards those shortcomings and other factors? Evaluate the change process using the institutional framework introduced by Burns and Scapens.

2. Literature review
3.1. Development and trend in research of budgets
To understand the financial planning system in the sample company, this dissertation will begin with a review of relevant literature on the development and trend of budget research. This section will start from the emergence and benefits of traditional budgeting, and then move on to the criticism of it, and finally raise alternative ways tackling the critiques.

Being one of the most prevailing instruments of exercising planning and controlling in organisation, budgeting’s origin could be traced back to government financial controls over expenditure, and gradually evolved into a mechanism of planning and controlling when blended with the idea of standard costing (Danture Wickramasinghe, 2007).

Some well recognized classical functions of traditional budgeting system fall within the framework of agency theory. One example would be affirming its key role in resource allocation, authority delegation and performance evaluation (Kilfoyle and Richardson, 2011). Horngren et al. (2010) also notes that the budget facilitates coordination and communication among sub-units across the entity, and ultimately provides incentives to both managers and employees. Moreover, budget plays a crucial role in people’s working experiences, specifically dealing with role ambiguity, even without the existence of formal accountability, financial inducements and involvement in budget preparation (Marginson and Ogden, 2005).

In addition to those functionalist merits within corporate at individual and organizational level, another set of research tries to praise budgets using institutional philosophy. One project claims that in UK devolved bodies, budget is acting more like a representation of political aspirations and objectives, a legitimacy tool of their behaviors, resulting in trust placing into governance by quantification (Lapsley et al., 2007). Although not worked as expected, an Australian university is also observed to introduce a new budget system with the initial intention of gaining legitimacy externally from funding agency as well as internally from its staff (Moll and Hoque, 2011).

Opposite to the literature promoting how corporation would benefit from budgets,...
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