**1. Introduction**

In recent decades the organizational environment has changed, being more complex, turbulent, and unpredictable than in the past, posing new challenges to managers as they must make decisions in uncertain environments (Al-Mawali and Am 2016; Baines and Langfield-Smith 2003; Chenhall 2003; Chenhall and Langfield-Smith 1998a; Chong 1996; Otley 2016). Recently, in dealing with the unprecedented situation of the COVID-19 pandemic, decision makers have faced many types of environmental uncertainty; for example, uncertainty about the reliability of information flows (Lodge and Boin 2020), irrational reactions of financial markets, extreme volatility of the economy, etc. Making decisions in such an environment where information is incomplete and there are no correct and clear answers is unprecedented in its degree of uncertainty (Aon 2020). Nevertheless, decision makers must obtain proper information to make strategic decisions that would influence organizational competitive advantages and performance (Adeniran and Obembe 2020; Oyewo 2021).

Although several empirical studies have shown the influence of perceived environmental uncertainty on decision-making, few have examined the role of accounting information in explaining this association (Abu-Rahma and Jaleel 2019). In this context, accounting

**Citation:** Pires, Rui, and Maria-Ceu G. Alves. 2022. The Impact of Environmental Uncertainty on Accounting Information Relevance and Performance: A Contingency Approach. *Economies* 10: 211. https://doi.org/10.3390/ economies10090211

Academic Editors: Ralf Fendel, Robert Czudaj and Sajid Anwar

Received: 1 July 2022 Accepted: 30 August 2022 Published: 2 September 2022

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**Copyright:** © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

information becomes relevant, namely non-financial, external, and future-oriented information, to support organizational change and decision-making. For an organization to survive and operate with success, it is critical that managers have access to useful and timely information so they can act and make the best decisions (Al-Mawali and Am 2016; Alves 2017; Oyewo 2021; Thuan et al. 2022; Visedsun and Terdpaopong 2021).

In this study, accounting information is defined as the formalized financial and nonfinancial information (Massicotte and Henri 2021) provided on a regular basis for decisionmaking purposes. However, a major problem that managers face is the need for credible information to assist them in the decision-making process (Frazer 2020). Additionally, despite non-financial information having gained growing relevance (Czaja-Cieszy ´nska et al. 2021), it does not substitute for financial information, which is considered of little relevance in uncertain decision-making contexts, because it is too aggregated and available too late (Chenhall and Langfield-Smith 1998b; Johnson and Kaplan 1987), even if in some cases, financial information continues to have the confidence of managers in decision-making (Bhimani and Langfield-Smith 2007; Chow and Van der Stede 2006; Hyvönen 2007). Nonfinancial information is, therefore, complementary to financial information and these two types of information can be used simultaneously in different situations or for different purposes (Chenhall and Langfield-Smith 2007; Chow and Van der Stede 2006; Lau and Sholihin 2005; Massicotte and Henri 2021; Monteiro et al. 2021; Visedsun and Terdpaopong 2021).

Following the contingency approach, several authors argue that the fit between internal factors (e.g., organizational structure, management accounting systems and characteristics of accounting information) and external factors (e.g., environmental uncertainty and intensity of competition) leads to a better management and organizational performance (Al-Mawali and Am 2016; Baines and Langfield-Smith 2003; Boulianne 2007; Chenhall 2003; Chong 1996; Löfsten and Lindelöf 2005; Oyewo 2022; Turner et al. 2017). For example, some studies suggest that giving greater weight to non-financial and external information in a context of environmental uncertainty improves organizational performance (Al-Mawali and Am 2016; Hoque 2004, 2005; Hoque and James 2000). Thus, to promote organizational performance, it is critical to adjust the accounting information relevance to the level of environmental uncertainty.

In fact, some empirical studies report a direct and positive effect of environmental uncertainty on accounting information relevance/use for decision-making purposes (e.g., Al-Mawali and Am 2016; Cescon et al. 2019; Latan et al. 2018; Oyewo 2021, 2022). Furthermore, previous literature also shows a direct and positive effect of accounting information or management accounting practices on performance (e.g., Adeniran and Obembe 2020; Baines and Langfield-Smith 2003; Cadez and Guilding 2008; Hoque and James 2000; Latan et al. 2018; Turner et al. 2017; Visedsun and Terdpaopong 2021). Concerning moderation analysis, Hoque (2005) showed that environmental uncertainty moderates the relationship between the use of some non-financial performance measures for performance evaluation and organizational performance. Al-Mawali and Am (2016) concluded that environmental uncertainty moderates the relationship between customer accounting information use and organizational performance. However, to the best of our knowledge, no recent study examines, specifically, the association between environmental uncertainty, accounting information relevance, and organizational performance, or investigates the influence of environmental uncertainty on the relationship between non-financial information relevance for decision-making purposes and organizational performance.

Therefore, the main purpose of this paper is to analyze the association between environmental uncertainty, accounting information relevance in decision-making, and organizational performance. Furthermore, we intend to analyze how environmental uncertainty moderates the relationship between non-financial information relevance and organizational performance. In this way, this paper aims to answer to the following research questions: What is the association between environmental uncertainty, accounting information relevance, and organizational performance? How does environmental uncertainty influence the relationship between non-financial information relevance and organizational performance?

This study provides additional insights regarding the relevance of financial and nonfinancial information for decision-making purposes under uncertainty contexts and its influence on organizational performance, thus contributing to the literature in this research field. Hence, it extends the knowledge on which is the most suitable accounting information for certain situations. Moreover, our study also documents the moderating role of environmental uncertainty on the relationship between non-financial information relevance for decision-making purposes and organizational performance.

The remainder of the paper is structured as follows. In Section 2, we present a summary of the relevant literature and develop our research hypotheses. The research design of this study, including the sample, data collection, and variables measurement, is detailed in Section 3. Section 4 presents and discusses the results regarding the association between the degree of environmental uncertainty, accounting information relevance, and organizational performance. Finally, Section 5 provides the main conclusions, theoretical and practical implications, and limitations of this research, outlining, also, future research opportunities.

#### **2. Theoretical Framework and Research Hypotheses**

Organizational environment considers the set of physical and social factors external to organizations that influence their internal characteristics and are therefore considered in the decision-making process (Haldma and Lääts 2002; Löfsten and Lindelöf 2005). Factors such as globalization of operations, increased competition, technological changes, the demand for continuous improvement, and new demands on social and environmental responsibility cause constant changes that lead to increased environmental uncertainty (Latan et al. 2018; Löfsten and Lindelöf 2005; Mia and Clarke 1999; Newkirk and Lederer 2006; Otley 2016). Environmental uncertainty represents a challenge for every organization today and is related to the lack of information and the speed of information, which limit actions (Latan et al. 2018). Given its influence on organizational structure and systems, environmental uncertainty is one of all the variables used in the pioneer contingent studies that has gained the widest attention in management accounting research (Otley 2016).

Recently, in dealing with the unprecedented situation of the COVID-19 pandemic, many decision makers have faced environmental uncertainty, about the reliability of information flows (Lodge and Boin 2020), irrational reactions of financial markets, extreme volatility of the economy, etc. Making decisions in such an environment is unprecedented in its degree of environmental uncertainty (Aon 2020). In these contexts, the information needed by managers in decision-making increases (Baines and Langfield-Smith 2003; Chenhall and Langfield-Smith 1998a, 1998b; Chong 1996; Latan et al. 2018), given the increased unpredictability of future events (Chenhall and Morris 1986). In these conditions of high uncertainty, sophisticated accounting information can help managers enhance decision-making, providing some alternatives and solutions (Latan et al. 2018). On the other hand, environmental uncertainty makes it more necessary for managers to resort to strategic planning (Baines and Langfield-Smith 2003; Newkirk and Lederer 2006) and thus it encourages the introduction of action plans to respond to threats and opportunities (Mia and Clarke 1999).

Managers that face greater environmental uncertainty attach a greater utility to nonfinancial information, because they consider it more suitable (Boulianne 2007; Chenhall and Morris 1986; Hoque 2005; Hoque and James 2000; Lal and Hassel 1998; Monteiro et al. 2022). Traditional accounting information, mainly on financial and internal events, is too aggregated and inappropriate (Chenhall and Langfield-Smith 1998b; Johnson and Kaplan 1987) and is therefore inadequate and unhelpful in contexts of environmental uncertainty (Hayes 1977). Another limitation of this information is that it does not reflect the efficiency of organizations concerned with intangible factors such as quality, continuous improvement, and customer satisfaction (Baines and Langfield-Smith 2003). In these cases, decision makers need timely, non-financial, and external accounting information (e.g., on markets, customers, and competitors) (Afifa and Saleh 2021; Boulianne 2007; Chenhall and Morris 1986). This is the most relevant information for making better decisions (Baines and

Langfield-Smith 2003), as well as to focus management control on the strategic uncertainties of the organization (Vaivio 1999). It is within this context that the first research hypothesis is formulated.

**Hypothesis 1.** *The relevance attributed to non-financial information for decision-making is greater when environmental uncertainty is higher.*

As previously mentioned, traditional management accounting information, mostly internal and financial information, has lost some relevance for decision makers in the current circumstances of the organizational environment (Johnson and Kaplan 1987; Ma et al. 2022). Under such circumstances, non-financial, external, and timely accounting information has won the confidence of managers because it alerts them to new situations, allowing a better understanding and control of costs, and enables the achievement of competitive advantages (Chenhall and Langfield-Smith 1998a; Oyewo 2022; Vaivio 1999). Quantitative non-financial information, in particular, helps to attain organizational alignment by integrating the horizontal and vertical dimensions of performance (Bertolotti et al. 2019). Moreover, non-financial information gains relevance for assessing performance in various areas of the organization, such as processes and operations, human resources, customers, and corporate strategy (Baines and Langfield-Smith 2003; Bhimani and Langfield-Smith 2007; Chenhall and Langfield-Smith 2007). Managers know that good performance in these areas leads to good non-financial performance, which increases an organization's financial performance (Baines and Langfield-Smith 2003; Turner et al. 2017). For instance, Turner et al. (2017) have shown that customer performance positively influences financial performance.

However, non-financial information does not replace financial information, and in many cases financial information is more relevant than non-financial information (Bhimani and Langfield-Smith 2007; Chow and Van der Stede 2006; Hyvönen 2007; Massicotte and Henri 2021). According to Bhimani and Langfield-Smith (2007), in strategy development both financial and non-financial information is used, while in strategy implementation greater emphasis is placed on financial information. In turn, Massicotte and Henri (2021) report the use of financial and non-financial information to oversee strategy implementation. Therefore, several authors consider that the main purpose of non-financial information is to complement financial information (Chenhall and Langfield-Smith 2007; Chow and Van der Stede 2006; Lau and Sholihin 2005), which is not sufficient for decision-making purposes (Monteiro et al. 2021). Additionally, for companies' performance measurement, financial measures are usually used, while non-financial measures such as customer satisfaction and loyalty, and employee satisfaction, cannot be ignored (Visedsun and Terdpaopong 2021). Based on the literature review, the following two hypotheses are proposed.

**Hypothesis 2.** *Managers assign greater relevance to financial information for decision-making than to non-financial information.*

**Hypothesis 3.** *Managers believe that financial information and non-financial information are complementary.*

Contingency research in management accounting considers that several internal and external contingent factors influence the characteristics of management accounting systems and accounting information required for decision-making (e.g., Abdel-Kader and Luther 2008; Cescon et al. 2019; Chenhall and Morris 1986; Chong and Chong 1997; Haldma and Lääts 2002; Hoque 2005; Hoque and James 2000; Mia and Clarke 1999; Oyewo 2022; Turner et al. 2017). In fact, according to Otley (2016), contingency research seeks to discover when specific accounting information and management accounting practices might be most appropriate for organizations in their specific circumstances. Furthermore, several studies also conclude that the fit between contingent factors such as environmental uncertainty, technology, business strategy, and organizational structure, management accounting systems, and accounting information required for decision-making improves organizational performance (e.g., Al-Mawali and Am 2016; Baines and Langfield-Smith 2003; Boulianne 2007; Cadez and Guilding 2008; Chong 1996; Hoque 2005; Hoque and James 2000; Löfsten and Lindelöf 2005; Mia and Clarke 1999; Oyewo 2022; Turner et al. 2017). For instance, Al-Mawali and Am (2016) show that the fit between environmental uncertainty and customer accounting information use improves organizational performance. In contexts of environmental uncertainty, if higher relevance is attributed to non-financial information, organizational performance will also be greater (Hoque 2004, 2005; Hoque and James 2000). Quality non-financial information contributes to decision-making success which, in turn, is relevant for business success (Monteiro et al. 2022). Therefore, the following research hypothesis is formulated:

**Hypothesis 4.** *The match between environmental uncertainty and non-financial information relevance improves organizational performance.*

### **3. Research Design**

The goals of this section are threefold: (i) to present the data collection instrument, (ii) to describe the sample and procedure of data collection, and (iii) to define the variables considered in the construction of the survey questionnaire.
