G39 - Corporate Finance and Governance: OtherReturn

This paper investigates current budgeting practices of Czech companies. The article aims to provide recent empirical evidence on the impact of business complexity on budgeting in the Czech Republic, with the main focus on modern budgeting methods. Despite the plethora of critical voices against traditional budgeting, budgeting remains an essential part of most companies' corporate governance. The empirical investigation is based on a questionnaire survey and its statistical evaluation using tests of goodness of fit and cluster analysis. Fundamental research questions of the paper include the influence of business complexity on Czech companies' budgeting practices, factors that currently play an essential role and their importance, and the approach of Czech companies to modern budgeting practices. The results indicate that Czech firms use various financial management tools, including budgets. Traditional budgeting methods are still dominant in most companies; empirical data evaluation confirmed mild differences between companies financed by domestic and foreign capital; nevertheless, those distinctions were not confirmed by statistical testing. Essential factors in the budgeting practice of the respondents are the connection of budgets to strategic planning and the possibility of using budgets as a tool for business performance evaluation.

The article focuses on the elaboration and research of the real nature of standards of value. The methodology chosen for this paper is mainly based on the late institutional economics and European theories of the economic and legal order, such as the German ordoliberalism. It is argued that standards (International Valuation Standards, European Valuation Standards, IDW S 1 etc.) are not determined by the stage of development of economic theory, but rather by valuation "best practices". The standards of value, which are normatively defined, first enable us to connect the valuation and the valuation purpose. The value standard or the contained value basis establishes the connection between the value and the valuation purpose, and make the estimated value relevant, or subject to the valuation purpose. Further, the purpose of the standards as a set of rules is examined, and the entities involved in the formulation of the standards and its influence are closely connected. There were identified three driving forces shaping the current scope and status of both international and national valuation standards: firstly, the state and legislation (hard and soft law), secondly, science providing a methodological background, and lastly, joint interest groups, such as appraisers and appraisers' associations who are generally responsible for the final versions of the standards. Since Czech commercial law does not precisely address all possible market transactions and applicable standards of value, it is argued that the International Valuation Standards can and should also be applied in the Czech Republic, since their purpose would show its effect in the Czech Republic, too. Other inspiration for business valuation can be found in the German IDW S 1 standard.