Abstract
This study examines how budget participation influences budget slack creation propensity through the mediation of distributive and procedural fairness, managerial trust, and budget goal commitment. The data was collected from 103 respondents holding managerial position in 49 Indonesian distribution companies. Despite its limitations, this study has both academic and practical implications. The study adds to the budgetary slack literature in an Indonesian country which has not been widely researched. The result suggests that budget participation influences distributive and procedural fairness, which interact with one another and influence managerial trust. Managerial trust and procedural fairness together influence budget goal commitment, which decreases propensity of budget slack creation. The findings presented in this study should have important implications for Indonesia companies to reduce slack creation and enhance commitment and trust, it is suggested to improve procedural fairness, one of which by implementing budget participation.
Highlights
Budget is a vital management tool widely used by companies across the world for planning and as a basis for allocating scarce human, physical, and financial resources.[1]
Responding to that, Maiga and Jacobs[9] did a research on the intervening variables between budget participation and propensity to create budget slack. They investigated a comprehensive model of the relationships between budget participation, procedural fairness, distributive fairness, managerial trust, goal commitment and managers’ propensity to create slack
The construct’s reliability is assessed using Composite Reliability (CR), which values can be seen in Appendix 1
Summary
Budget is a vital management tool widely used by companies across the world for planning and as a basis for allocating scarce human, physical, and financial resources.[1]. One of the factors proposed as the cause of intentional budget slack is participative budgeting.[7] Participative budgeting is a budgeting system which involves the employees in the budget preparation process, allowing them to have influence on their approved budgets.[8] By some, participative budgeting is considered as a cause of budget slack.[7] some other literatures state that budget participation doesn’t really impact budget slack creation[9] or even help to prevent budget slack creation[3] This suggests the presence of other variables intervening the correlation between the two. The private sector services and related industries are expected to employ more than a third of the global workforce which still increases over time This is in contrast with industrial sector’s employment which is expected to stabilize at slightly below 22% of total employment.[9] Highly dynamic and rapidly changing industry calls for a heightened performance to keep up with the competition.
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