The Intervening Effect of Information Asymmetry on Budget Participation and Segment Slack

Abstract

The objective of this study was to extend prior research by examining subordinate–superior information asymmetry as an intervening variable linking budgetary participation and slack. The results indicate two offsetting effects of participation on slack. A significant negative indirect relation between participation and slack was found to act through information asymmetry. Thus, managers reveal private information during the budget process, reducing information asymmetry which subsequently reduces budget slack. These results provide evidence about the inability of past research to confirm a consistent direct relation between budget participation and budget slack.

Citation

Kren, L. and Maiga, A. (2007), "The Intervening Effect of Information Asymmetry on Budget Participation and Segment Slack", Lee, J.Y. and Epstein, M.J. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 141-157. https://doi.org/10.1016/S1474-7871(07)16004-4