Creation Of Budgetary Slack Research Articles

SENJANGAN ANGGARAN : STUDI ATAS PENGENDALIAN ANGGARAN, IKLIM KERJA ETIS DAN PERSEPSI KEADILAN PROSEDURAL

Abstract Data was collected by distributing questionnaires using purposive sampling technique to the respondents. Respondents are middle and lower level managers in Banten which of course involved in the budgeting process, with a total of 41 respondents at public organization. Data were analyzed using SEM with the help of SmartPLS version 2.0. Results from this study revealed that the variable Budgetary Control Effectiveness and Ethical Work Climate has a positive and significant impact on the Procedural Justice perception. Variable Ethical Work Climate and Procedural Justice Perception Climate has a negative and significant impact on the Propensity to Create Budgetary Slack, while the variable Budgetary Control Effectiveness no significant effect on the Propensity to Create Budgetary Slack.

The impact of participation in strategic planning on managers’ creation of budgetary slack: The mediating role of autonomous motivation and affective organisational commitment

This study investigates the impact of participative strategic planning on managers’ creation of budgetary slack. Specifically, we draw on self-determination and organisational commitment theory to examine whether and how the degree of managerial participation in strategic planning relates to the creation of budgetary slack. The hypotheses are empirically tested with survey data obtained from 247 managers in a cross-section of West-European organisations. The results from a structural equation model, with controls for budget participation and slack detection, suggest that increased participation in strategic planning leads to lower budgetary slack creation through the suggested path of heightened affective organisational commitment. In addition, the results indicate that budget participation decreases the creation of budgetary slack through the mediating effect of autonomous budget motivation, suggesting that both elements of the organisational planning process are related to the creation of budgetary slack. Our study contributes to the growing research exploring the interface between accounting and strategy by recognizing the importance of participative strategic planning for understanding managers’ creation of budgetary slack.

Do Shared Interests Affect the Accuracy of Budgets?

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.

Budgetary slack under budget-based incentive schemes—the behavioral impact of social preferences, organizational justice, and moral disengagement

This article examines factors influencing the creation of budgetary slack under budget-based incentive schemes. Classical agency theory serves as the starting point, with the dual role of budgeting as a planning and a motivational instrument. Under the assumption of fully rational utility maximizers, people should incorporate the maximum amount of budgetary slack possible given budget-related compensation. However, this behavior cannot be observed in reality or in experimental settings. Therefore, two important questions remain partially unanswered with regard to explaining the phenomenon of budgetary slack: First, why do individuals not maximize their own utility through budgetary slack? And, second, why is budgetary slack not eliminated completely due to reasons leading to the first question? Behavioral accounting research in this area has gained significant importance in the last years. In this domain, we focus on studies employing the psychological theories of social preferences, organizational justice, and moral disengagement and present primarily experimental as well as survey-based field research findings. The analysis leads to suggestions for further research in this area.

Factors Affecting the Propensity to Create Budgetary Slack Evidence from Vietnamese Enterprises

Budgeting is widely advertised as an effective managerial accounting tool but has been criticized mainly for budgetary slack reason. The purpose of this article is therefore to empirically examine relationships between budget participation, budget emphasis, risk awareness, private knowledge and the propensity to create budgetary slack. This study also extends the previous research by testing the hypothesized effect of the nonfinancial managerial accounting information use on various factors associated with the propensity to create budgetary slack. A survey data from 243 Vietnamese enterprises was used to conduct a structural equation modeling analysis. The results indicate that budget participation and budget emphasis incrementally affect the propensity to create budgetary slack while nonfinancial managerial accounting information is fairly useful to limit human aspects of budgeting. In addition, no correlation between private knowledge and creation of budgetary slack by subordinates was found. Once again, the results of this research confirm the effects of human factors in budgeting, which measured in a Vietnamese business environment and extended the understanding of the role of nonfinancial managerial accounting information in improving the budgeting process.

Factors Affecting the Propensity to Create Budgetary Slack Evidence from VietnameseEnterprises

Factors Affecting the Propensity to Create Budgetary Slack Evidence from VietnameseEnterprises

Do Organizational Politics and Organizational Commitment Affect Budgetary Slack Creation in Public Organizations?

New public management promoting efficient use of public resources has increasingly drawn attention for the last three decades. However, the problem of inefficient use of public resources has not been resolved yet. Investigating the budgetary slack concept may be useful in solving this efficiency problem. To this end, this research focuses on propensity of managers who work in public organizations to create budgetary slack and factors affecting their propensities such as perception of organizational politics and organizational commitment. Results demonstrate that the effects of “general political behavior” and “go along to get ahead”, which are the sub-dimensions of organizational politics perception, on managers’ propensity to create budgetary slack are positive. It is also found that organizational commitment has a statistically significant and negative impact on general political behavior and go along to get ahead.

RELAÇÃO DA FOLGA ORÇAMENTÁRIA COM PARTICIPAÇÃO E ÊNFASE NO ORÇAMENTO E ASSIMETRIA DA INFORMAÇÃO

The study aimed to investigate the relationship of budgetary slack with participation and emphasis on budget and managers’ information asymmetry. Descriptive research with quantitative approach was conducted through survey research with an accessibility sample of 49 managers of organizational areas of 40 companies that have budget. The survey instrument comprised 23 assertions of a five points in Likert scale, grouped into five blocks. The assertions of budgetary slack and information asymmetry were extracted from Dunk (1993), participation in budget from Milani (1975) and López, Stammerjohan and McNair (2007), and emphasis on budget from Hopwood (1972). For data analysis techniques of descriptive statistics and canonical correlations were used. The survey results show that there is a relationship between budgetary slack and participation and emphasis on budget. There is evidence that managers tend to have a larger slack in the participation of the budget when the emphasis on budget and information asymmetry are high, confirming the understanding of Dunk and Perera (1997). It was concluded that managers surveyed have an intermediate level of budgetary slack, and that this has relation with participation in the budget, which is higher when there is information asymmetry and emphasis on budget. However, the results are not conclusive since not all of them converged with previous studies, which requires further research to explain the creation of budgetary slack by managers.

Folga organizacional no processo de gestão do orçamento: um estudo no SENAC de Santa Catarina

A folga organizacional no processo orçamentário tem recebido atenção de pesquisadores e gestores em vista de possíveis conflitos de interesses entre principal e agente. Neste sentido, o estudo objetiva identificar a propensão de criar folga organizacional no processo de gestão do orçamento pelos Gestores das Unidades de Negócios do SENAC de Santa Catarina. Pesquisa descritiva, com abordagem quantitativa, foi realizada por meio de uma survey. A população da pesquisa compreende os 21 Gestores das Unidades Operativas do SENAC de Santa Catarina. Um questionário foi encaminhado no mês de julho de 2010, sendo que a amostra constitui-se dos 15 respondentes da pesquisa. O instrumento de coleta de dados consistiu de um questionário traduzido da pesquisa de Onsi (1973), composto por 42 questões fechadas, envolvendo escala Likert, com fatores de oito dimensões da prática da gestão do orçamento, focalizando a folga orçamentária. Os dados foram importados para o software estatístico SPSS versão 13, para fins de análise dos elementos de folga por meio de estatística descritiva, do Alfa de Cronbach e da técnica de análise fatorial. Os resultados do estudo indicam que os gestores têm propensão para criar folga em seus orçamentos, apesar do SENAC não remunerar seus gestores com base nos resultados, o que por si só deveria ser um fator que não motiva a criação de folga orçamentária. Diferente da pesquisa realizada por Onsi (1973), no SENAC os motivos para a criação de folga orçamentária decorrem do interesse dos gestores em apresentar desempenho superior em relação ao previsto no orçamento.

How Can Management Control Systems Fairness Reduce Managers’ Unethical Behaviours?

Empirical research has shown that as management control systems (MCS) put heavy pressure on managers to achieve their objectives, they may induce two types of unethical behaviour: creation of budgetary slack and data manipulation. Recently, studies have introduced Organizational Justice theory into the area of management accounting research and shown the positive effects of organizational justice on managers’ attitudes and behaviours. However, few studies have systematically analysed how MCS fairness reduces unethical behaviours and which characteristics of MCS could increase managers’ perception that they are treated fairly. The purpose of the paper is to contribute to this research. It formulates testable hypotheses on how some specific dimensions of MCS can enhance perceived fairness, which in turn helps to reduce the creation of slack and data manipulation through increased Organizational Commitment and Trust in supervisor.

How can management control system fairness reduce managers’ unethical behaviours?

Summary Empirical research has shown that as management control systems (MCS) put heavy pressure on managers to achieve their objectives, they may induce two types of unethical behaviour: creation of budgetary slack and data manipulation. Recently, studies have introduced Organisational Justice theory into the area of management accounting research and shown the positive effects of organisational justice on managers’ attitudes and behaviours. However, few studies have systematically analysed how MCS fairness reduces unethical behaviours and which characteristics of MCS could increase managers’ perception that they are treated fairly. The purpose of the paper is to contribute to this research. It formulates testable hypotheses on how some specific dimensions of MCS can enhance perceived fairness, which in turn helps to reduce the creation of slack and data manipulation through increased Organisational Commitment and Trust in supervisor.

PENGARUH PARTISIPASI PENYUSUNAN ANGGARAN, DAN KOMITMEN ORGANISASI TERHADAP SLACK ANGGARAN PADA TATANAN CONTAINER

This study provides empirical evidence that budgetary participation, budgetary emphasis and organizational commitment might be the factor to create budgetary slack at PT Masaji Tatanan Container. Respondents of this study are all manajers and supervisors that participate in preparation of the budget. The results indicate that budgetary participation and organizational emphasis are not positively influence for the creation of budgetary slack. But budgetaru emphasis is positively influence the creation of budgetary slack. Finally, suggestion for PT Masaji Tatanan Container is company should be concerned to manajemen control system while creating budget, since company using budget for assessment performance.

Rethinking budgetary slack as budget risk management

PurposeThe purpose of this paper is to draw on a small‐scale study that investigated the relationships between the budget‐setting process and slack, and how budgetary, behavioural and contextual factors can affect this relationship, to reconceptualise the phenomenon of budgetary slack as a budget risk management strategy.Design/methodology/approachA case study method was employed, which enabled the researchers to investigate factors suggested by prior literature that affect slack creation. In total, nine structured interviews were conducted in a state‐owned Egyptian petroleum company, which gave the researchers a different way of thinking about the budget slack phenomenon.FindingsThe authors found that slack is created, but not perceived negatively by managers, wherever they are in the organisational hierarchy. Few factors from the literature appeared to have any effect on the creation of budgetary slack, but the covert view of budget slack as a negative behaviour, adopted by early literature was perceived by participants as unethical and inconsistent with Egyptian culture. Managers did not recognise the notion of budgetary slack, though a “contingency” was created and was seen as entirely rational and acceptable by both superiors and subordinates. These findings are consistent with more recent literature in taking a more positive view, and with risk management thinking.Research limitations/implicationsThe evidence from this small study in a single organisation obviously cannot be generalised to the whole population. More research is needed in different contexts in order to discover whether managers may perceive this link between budget contingencies and risk management. Also, further research may explore the ethical dimension of behaviour and its possible foundation in religious values and beliefs, to see if this influences how building “contingencies” into budgets is perceived.Practical implicationsIf we were to stop portraying the creation of budgetary slack as a negative behaviour and accept that practitioners find it acceptable in managing budgets in an uncertain economic environment, more managers may be open about it.Originality/valueThe main contribution of this paper is that it proposes that what was originally described as a negative behavioural phenomenon be rethought as a positive risk management strategy. Though other authors have viewed budget slack more positively, none has made the explicit link to risk management. The authors reposition budget slack in terms of contingency planning and show how this is consistent with risk management thinking.

Centralization versus Delegation in an Experimental Capital Budgeting Setting

AbstractIn an experiment, we model two stylized facts about capital budgeting practice, budgetary slack creation and delegation of decision-making authority. In our setting, under centralization, headquarters announces a budget, the division manager gives a cost report, and headquarters decides on the project. Under delegation, headquarters allocates a budget to the manager, and the manager is authorized to make the investment decision. We argue that the ability of headquarters to commit to a budget moderates the effect of delegation, and we find evidence in favor of our argument as there is an interaction effect of delegation and commitment to budgets. The effects of delegation are particularly strong when budgets are non-binding as delegation serves as a substitute for commitment in this case. This leads to smaller expenditures and to a higher headquarters’ payoff under delegation than under centralization. In contrast, when headquarters can commit to the budget, the descriptive data are consistent with our conjectures about the effects of honesty preferences, but the effects are too small to be significant.

The Effect of Contract Framing on Subordinates Performance and Propensity to Create Budgetary Slack

The Effect of Contract Framing on Subordinates Performance and Propensity to Create Budgetary Slack

Why Business Unit Controllers Create Budget Slack: Involvement in Management, Social Pressure, and Machiavellianism

ABSTRACT: This paper investigates business unit (BU) controllers’ inclination to engage in the creation of budgetary slack. In particular, we explore whether controllers who are involved in BU decision making are more susceptible to social pressure to engage in slack creation than controllers who are not. We expect, and find, a crucial role of the controller’s personality. Results from an experiment among 136 management accountants suggest that the personality construct Machiavellianism interacts with involvement to explain controllers’ responses to social pressure to create budgetary slack. Controllers scoring high on Machiavellianism are more likely to give in to pressure by BU management to create budgetary slack when they have been involved in decision making. In contrast, controllers scoring low on Machiavellianism are less likely to give in to pressure to create slack when they have been involved in decision making.

The Effect of Attitudes Towards the Budgetary Process on Attitudes Towards Budgetary Slack and Behaviors to Create Budgetary Slack

In this study more positive attitudes towards the budgetary process are examined to see whether or not these cause less favorable attitudes towards budgetary slack, and whether less favorable attitudes towards budgetary slack causes or are caused by behaviors intended to create budgetary slack. The effects are tested using a structural equation model based on questionnaire data gained from 216 Taiwanese managers. The results indicate that more positive attitudes towards the budgetary process result in attitudes less favorable towards budgetary slack. A more favorable attitude towards budgetary slack predicts more frequent incidence of behavior to create budgetary slack and vice versa. The results suggest that the best way to diminish managerial budgetary slack behaviors is to instill in managers more positive attitudes toward the budgetary process and less favorable attitudes towards budgetary slack.

The Effect of Obedience Pressure and Perceived Responsibility on Management Accountants' Creation of Budgetary Slack

This study evaluates management accountants' susceptibility to inappropriate obedience pressure to create budget slack in violation of corporate policy. We also evaluate links between pressure effects and perceived responsibility, decision justifications, and underlying ethical dimensions. The results of an experiment with 77 management accountants reveal that despite pervasive perceptions of ethical conflict, almost half of the participants violated explicit policy and created budgetary slack when faced with obedience pressure from an immediate superior. The results also indicate that participants who added slack to their initial budget recommendation found themselves less responsible for their budget decision than did participants who refused to add slack. In addition, a majority of the participants indicated that the creation of budgetary slack was unfair, unjust, and/or contrary to their duties.

Do Broad Scope Managerial Accounting Systems Moderate the Effects of Budget Emphasis, Budget Participation and Perceived Environmental Uncertainty on the Propensity to Create Budgetary Slack?

This study empirically investigates the potential moderating effect of broad scope managerial accounting system use on several variables previously shown to contribute to the formation of budgetary slack. It is hypothesized that the additional information provided via a broad scope managerial accounting system would reduce uncertainty for managers and eliminate a portion of the need to build excess slack into the budget. Survey data collected from Fortune 1000 managers indicates that the use of broad scope managerial accounting systems does not moderate the impact of budget emphasis, budget participation and perceived environmental uncertainty on the propensity to create budget slack.

The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation

Previous studies have provided contradictory evidence with respect to the effect of rigid budgetary controls on slack and other dysfunctional behaviors. One motivation for the current study was to test whether spillover effects exist between two alleged dysfunctional consequences of a rigid budgetary control style: budget slack creation and managerial short-term orientation. The data support this contention: reducing one form of dysfunctional behavior (slack creation) through rigid controls seems to spill over into another form (stronger management focus on business matters that affect short-term results). However, the budgetary control styles that organizations implement, as well as the behaviors that they encourage, may be affected by two important antecedents: business unit past performance and competitive strategy. The results indicate that business units that either pursue a differentiation strategy or have been more profitable are subject to less rigid budgetary controls, which augment the propensity to build slack as well as the tendency for managers to think long-term. These relationships are tested in a structural equation model on survey data obtained from 153 business unit general managers.