Influence of Information Asymmetry and Self-Efficacy on Budgetary Slack: An Experimental Study

Zaenal Fanani,Georgina Elizabeth K Saudale

doi:10.9744/jak.20.2.62-72

Abstract

Participation in the budgetary process does not only comes with a positive effect(s) but could also lead to negative behavior(s) of employees, one of which is the creation of budgetary slack. Previous studies said that information asymmetry is rated as one of the causes of the creation of budgetary slack. The purposes of this 3x2 factorial experimental study and between subject designs are to see the effect of information asymmetry on the budgetary slack and see whether information asymmetry and self-efficacy leads to the creation of budgetary slack. This study involved 65 undergraduate and postgraduate students from the accounting department of Economics and Business Faculty in Universitas Airlangga Surabaya as participants. One way ANOVA and two- way ANOVA is used to test and analyze the proposed hypothesis. Results show that information asymmetry influences the creation of budgetary slack. However, production managers with high or low self-efficacy are still taking advantage of asymmetric information that happened to do budgetary slack.

Highlights

In the budgetary process, the purpose of the budget itself can be aligned to the interests of an individual or a team, and behavioral problems will show when the purpose is too hard, too easy, or when the purpose caused conflicts of interest between a company and their employee
Budgetary slack is the gap between the total budget proposed by the subordinate and its best estimation [2]
Slack appears when subordinate and supervisor do not share the same interests. [13] stated that subordinates intentionally created Slack for their personal interests, even more so when budgetary achievement is used as the main indicator of performance assessment. The subordinates used this condition in the budgetary process to their advantage by lowering the budgeted revenue and raising the budgeted expenses, which caused the gap between the total budget and the company‟s estimation. [4] stated in his research that participation in the budgetary process tends to lower the chance of budgetary slack

Summary

Introduction

The purpose of the budget itself can be aligned to the interests of an individual or a team, and behavioral problems will show when the purpose is too hard, too easy (or unclear), or when the purpose caused conflicts of interest between a company and their employee. The participation in the budgetary process resulted in several negative issues, one of which is budgetary slack. Budgetary slack is the gap between the total budget proposed by the subordinate and its best estimation [2]. [13] stated that subordinates intentionally created Slack for their personal interests, even more so when budgetary achievement is used as the main indicator of performance assessment. The subordinates used this condition in the budgetary process to their advantage by lowering the budgeted revenue and raising the budgeted expenses, which caused the gap between the total budget and the company‟s estimation. A different result is found in [14], which stated that there is a positive relation between budgetary participation and budgetary slack

Methods

Results

Conclusion