Budgetary participation and performance: some Malaysian evidence

Abstract

PurposeThe purpose of this paper is to explore the budgetary participation and performance (BPP) relationship in a public sector organization in a developing country, Malaysia. It also attempts to examine whether organizational commitment and perception of innovation mediate the BPP relationship.Design/methodology/approachA total of 111 budget managers in the Ministry of Defence, Malaysia, participated in the survey. Response rate was 74 per cent. A path analysis was utilised to examine the direct and indirect effects of budgetary participation on managerial performance.FindingsBudgetary participation affects managerial performance via the mediating variable of organizational commitment but not perception of innovation. There is a direct relationship between budgetary participation, managerial performance, organizational commitment and perception of innovation.Research limitations/implicationsThis is a study conducted in the Malaysian Ministry of Defence (MINDEF), thus results may not be generalizable to other organizations. It involves only two intervening variables; organizational commitment and perception of innovation and uses the intervening variable model to explain the budgetary participation and performance relationship. Budgetary participation improves managerial performance in MINDEF in two ways; directly, as a consequence of management involvement in the budgetary process, as well as indirectly, when managers' commitment to the organization increases due to their participation and involvement in the budgetary process.Originality/valueThis paper fills a gap in the literature as very few studies have examined budgetary participation in a developing country and in a public sector organization.