Recently, Brownell & McInnes (1986) suggested that managers might negotiate slack budgets in response to participation's reinforcement of the expectation of formal rewards being based on budget achievement. However, they also found that participation and managerial performance were significantly and positively linked, but were unable to explain this finding. The purpose of this paper is to suggest an explanation for the apparent contradiction of budgetary participation leading to lower managerial performance through the setting of slack budgets, yet being positively related to performance, by illustrating that participation and agreement between superiors and subordinates on evaluation criteria interact to affect subordinate manager performance. This suggests that superiors should exercise a degree of caution in participative budgetary settings. While superiors may be employing participation as a means of gaining access to subordinates' private information, subordinates themselves may be manipulating the process to obtain easier operating budgets.