Do Accounting Performance Measures Indeed Reduce Managerial Ambiguity Under Uncertainty?

Research on budget-based performance evaluation traditionally predicts that the use of accounting performance measures (APM) in complex, dynamic, and uncertain situations results in dysfunctional managerial attitudes and behaviors. Although this suggests that such situations require the use of subjective performance measures (SPM), empirical evidence is inconclusive, as APM, rather than SPM, have been found to also have a negative effect on managerial ambiguity. This suggests that APM may be more, rather than less, appropriate than SPM in situations of high uncertainty. This paper explores whether acknowledgement of different types of uncertainty may explain these apparently conflicting research findings. It develops hypotheses that predict differential interactions between the environmental uncertainty and task uncertainty and APM and SPM on managerial ambiguity. These hypotheses are tested using survey data from 250 managers in 11 organizations. Tests using moderated regression analysis provide support for the existence of different interactions between uncertainty and the use of performance measures, and provide reconciliation for the opposing findings in the extant literature.