Abstract
The creation of budgetary slack is a phenomenon associated with various behavioral aspects. This study focuses on accuracy in budgeting when the benefit of the slack is shared between the unit manager and his/her assistant. In this study, accuracy is measured by the level of slack in the budget, and the benefit of slack represents a financial consideration for the manager and the assistant. The study aims to test how shared interests in budgetary slack affect the accuracy of budget reports in an organization. To this end, an experimental study was conducted with a sample of 90 employees in management and other leadership positions at a cooperative that has a variable compensation plan based on the achievement of organizational goals. The experiment conducted in this study is consubstantiated by the study of Church, Hannan and Kuang (2012), which was conducted with a sample of undergraduate students in the United States and used a quantitative approach to analyze the results. In the first part of the experiment, the results show that when budgetary slack is not shared, managers tend to create greater slack when the assistant is not aware of the creation of slack; these managers thus generate a lower accuracy index than managers whose assistants are aware of the creation of slack. When budgetary slack is shared, there is higher average slack when the assistant is aware of the creation of slack. In the second part of the experiment, the accuracy index is higher for managers who prepare the budget with the knowledge that their assistants prefer larger slack values. However, the accuracy level differs between managers who know that their assistants prefer maximizing slack values and managers who do not know their assistants' preference regarding slack. These results contribute to the literature by presenting evidence of managers' behavior in the creation of budgetary slack in scenarios in which they share the benefits of slack with their assistants.
Highlights
The budget is an integral part of the governance structure and may be the management tool used most often by organizations (Davila & Wouters, 2005)
How does the presence of shared interests in budgetary slack affect the accuracy of budget reports in an organization? this study aims to test how shared interests in budgetary slack affect the accuracy of budgets in an organization
Several variables related to budgetary slack are found in the literature, the predominance of the analysis focuses on variables from the economic paradigm and relies on agency theory assumptions (Covaleski et al, 2003)
Summary
The budget is an integral part of the governance structure and may be the management tool used most often by organizations (Davila & Wouters, 2005). The budget provides direction over a specific time period and is an important basis for evaluating the performance of the organization and its managers (Davila & Wouters, 2005; Frezatti, Nascimento, Junqueira, & Relvas, 2011). The latter purpose can lead managers to promote budgetary slack to facilitate the achievement of goals that are established and quantified in the budget (Yuen, 2004). The authors defined slack as the difference between estimated cost and actual cost, which is consistent with the understanding of slack as the overestimation of costs in the budget
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
