Primary Determinant of Budgetary Slack in Small Manufacturing Firms

Abstract

This study intendsto examine the effect of budget emphasis and budget participation on budgetary slack practiced in small manufacturing companies. The practices of budgetary slack are often thought to occur only in large companies, but depends on agency theory it can be apply to any agency relationship at every level and type of organization, the practices of budgetary slack, as a form of control costs, or part of agency costs, is suspected to occur in small manufacturing companies. Budgetary slack is worth investigating because this practice does not provide real economic results for the company. This research was conducted through a survey of 80 small manufacturing companies located in Tangerang. Data analysis techniques used linear regression.The resulthas indicatethat: (1)budgetemphasis isthe maindeterminantof budgetary slack practice; (2) budget participation, although it has a strong correlation with budgetary slack, is a significant determinant of small manufacturing companies.