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Article
Publication date: 20 December 2019

Alpo Karila, Jarmo Vakkuri and Juhani Lehto

The purpose of this paper is to analyze the dynamics of budgetary biasing in the context of public hospitals.

Abstract

Purpose

The purpose of this paper is to analyze the dynamics of budgetary biasing in the context of public hospitals.

Design/methodology/approach

The study applies theories of accounting and budgeting behaviors in the specific institutional context of health care systems. Based on the theoretical framework, data from interviews with hospital budget officers were analyzed using qualitative content analysis.

Findings

A typology of biases is provided. It proved to be useful and highlighted the central empirical assumptions and preliminary results of biasing dynamics.

Practical implications

Understanding the logic of budgeting actors and the drivers of bias may help explain why bias so often appears in health care budgeting. It further contributes to understanding whether the bias is functional or dysfunctional.

Originality/value

The concepts of budgetary bias are rarely used in the context of health care budgeting, so the study fills a gap in research knowledge.

Details

International Journal of Public Sector Management, vol. 33 no. 4
Type: Research Article
ISSN: 0951-3558

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Article
Publication date: 1 February 1996

Dennis W Taylor

Behavioural consequences of emphasis on budget‐related performance evaluation measures have been extensively researched in single countries, but not in cross‐cultural…

Abstract

Behavioural consequences of emphasis on budget‐related performance evaluation measures have been extensively researched in single countries, but not in cross‐cultural organizational settings. Contingency theory is invoked in this study to model the “fit” for international joint venture companies (IJVs) between two contingency factors — environmental uncertainty (EU) and organizational objectives conflict (OOC)—and the organizational control sub‐system variable of budgetary emphasis (BE). The impact of this “fit” on the effectiveness of managers from Chinese and Western sides of an IJV partnership is tested in respect of the effectiveness outcomes of self‐rated managerial performance (MP) and the creation of budgetary slack (BS). These two effectiveness constructs are chosen for this study because they provide a complementary picture of effectiveness in a budget‐related behavioural settings. To test the various “fit” hypotheses, this study provides results from a survey of Sino‐foreign JVs. Specifically, middle and senior managers representing the foreign partner to a Sino‐foreign JV were chosen in two groupings, Hong Kong Chinese managers and Western managers. Multiple regression was performed for the independent variables (EU, OOC and BE) in relation to the respective dependent variables (MP and BS) and the respective sample groups (HK Chinese and Western). Both main and interaction effects are reported in this study. Implications of the findings for the use of budgetary emphasis in management performance evaluation in IJVs are discussed.

Details

Asian Review of Accounting, vol. 4 no. 2
Type: Research Article
ISSN: 1321-7348

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Book part
Publication date: 31 July 2012

John Y. Lee

This article makes a contribution to the conflict resolution literature by examining the effect of relative hedonic utility on budgetary conflict resolution. A lab…

Abstract

This article makes a contribution to the conflict resolution literature by examining the effect of relative hedonic utility on budgetary conflict resolution. A lab experiment, using practicing CPAs as subjects, has been conducted to examine the effect. The literature in this field supports the implication that a person's happiness, which classical economists call hedonic utility, depends not only on the true state she (he) is in, but also on her (his) perceived state relative to the state of others. The biased perception makes a decision maker look at the state of the world more often when the state is bad than when the state is good, according to a prior research study. Although the true state of the world is split evenly between a good state and a bad one, a biased perception makes a decision maker compare herself more often to her neighboring individual when the state is bad. Accordingly, a decision maker who feels unhappy more often, while the magnitude of the pain may be the same, would exhibit a more distributive, zero-sum game type conflict resolution mode relative to another decision maker who feels unhappy less often and shows a more integrative conflict resolution mode. The test results confirmed the hypotheses. Statistically significant test results show that there are distinct effects of biased perception of individuals on budgetary conflict resolution.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-78190-105-2

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Article
Publication date: 1 March 2008

Randall L. Kinnersley and Nace R. Magner

Program heads are key players in governmental budgeting because they are involved both in formulating their program’s budget and ensuring the program’s activities comply…

Abstract

Program heads are key players in governmental budgeting because they are involved both in formulating their program’s budget and ensuring the program’s activities comply with the budget. This paper synthesizes past research pertaining to two aspects of a government’s budgeting system-formal budgetary procedures fairness and budgetary procedures implementation fairness-that influence program heads’ attitudes and behaviors. Criteria are identified for each of the two forms of budgetary procedures fairness, as are specific types of attitudinal and behavioral reactions on the part of program heads. Reasons that program heads value fair budgetary procedures are also discussed. The paper concludes by presenting implications the research has for people involved in designing and implementing governmental budgeting systems and for governmental budgeting researchers.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 20 no. 3
Type: Research Article
ISSN: 1096-3367

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Book part
Publication date: 17 February 2011

Martijn Schoute and Eelke Wiersma

This chapter examines the relationship between purposes of budget use and budgetary slack, and the extent to which this relationship is mediated by two (potentially…

Abstract

This chapter examines the relationship between purposes of budget use and budgetary slack, and the extent to which this relationship is mediated by two (potentially) slack-reducing mechanisms, budget participation and budget emphasis. In a sample of survey responses from 44 Dutch listed firms, intensity of budget use is negatively related to budgetary slack, and this relationship is partially mediated by both budget participation and budget emphasis. Furthermore, three purposes of budget use are identified: budget usage for (a) planning and communication purposes, (b) coordination and allocation purposes, and (c) evaluation and rewarding purposes. The direct effect of purposes of budget use on budgetary slack seems especially due to budget usage for planning and communication purposes, which is also the case for the mediating effect via budget emphasis, whereas the mediating effect via budget participation seems especially due to budget usage for coordination and allocation purposes. Exploratory analyses do not show similar relationships with purposeful slack, that is, with slack that was purposefully allowed in the business units’ budgets by the firms’ top management.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-0-85724-817-6

Keywords

Content available
Article
Publication date: 31 August 2017

Quang-Huy Ngo, Thi-Nam-Ninh Doan and Thanh-Nha Huynh

Although the budgeting literature well documents managers' creation of budgetary slack in developed economies, lack of attention has been paid to this behaviour in…

Abstract

Although the budgeting literature well documents managers' creation of budgetary slack in developed economies, lack of attention has been paid to this behaviour in emerging economies. It is doubtful that some unique characteristics, only existing in emerging economies, cause this behaviour to be different than the budgeting literature predicts. Since there is no study examining managers' creation of budgetary slack in emerging economies, such as Vietnam, to get insight into whether or not these characteristics cause the differences, the aim of this study is to replicate prior budgeting studies by using Vietnamese samples. Particularly, we investigated the impact of budgetary participation, budget emphasis, information asymmetry, and the interactions between these variables on managers' creation of budgetary slack. Data obtained from the questionnaire sent to 99 Vietnamese managers shows that the last two variables and the interaction between them induce managers' creation of budgetary slack. However, the results also indicate that the first variable and the interaction between this variable and the other two variables respectively have no impact on managers' creation of budgetary slack. These results provide some insight into the creation of budgetary slack of Vietnamese managers for future studies to extend the line of research.

Details

Asian Journal of Accounting Research, vol. 2 no. 2
Type: Research Article
ISSN: 2459-9700

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Article
Publication date: 1 April 2006

Nace R. Magner, Gary G. Johnson, Harold T. Little, A. Blair Staley and Robert B. Welker

To summarize the findings of empirical studies the authors have conducted regarding budgetary procedures fairness and to discuss key implications of these findings.

Abstract

Purpose

To summarize the findings of empirical studies the authors have conducted regarding budgetary procedures fairness and to discuss key implications of these findings.

Design/methodology/approach

Summary and synthesis of the authors' empirical research.

Findings

Identifies criteria for, and types of attitudinal and behavioral reactions that managers have toward, formal budgetary procedures fairness and budgetary procedures implementation fairness. Provides information regarding how the two forms of budgetary procedures fairness work together to influence managers' attitudes and behaviors, and how they reduce managers' negative reactions to unfavorable budgets. Presents reasons that fair budgetary procedures are important to managers.

Research limitations/implications

The authors' studies used questionnaire data where all variables were measured at a single point in time, which provides little control over unmeasured variables and direction of causality. Future research should seek to expand the sets of criteria for and reactions toward budgetary procedures fairness, as well as to further detail the processes by which budgetary procedures fairness works. Also, relationships involving budgetary procedures fairness should be examined by means of laboratory experiments.

Practical implications

Underscores the importance of promoting formal budgetary procedures fairness and budgetary procedures implementation fairness in organizational budgetary systems, and provides concrete guidance in this regard.

Originality/value

Provides useful information to accounting and audit staff, budget committee members, supervisors, and other employees involved in designing and implementing organizational budgetary systems and to budgeting researchers.

Details

Managerial Auditing Journal, vol. 21 no. 4
Type: Research Article
ISSN: 0268-6902

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Book part
Publication date: 13 December 2004

Kristin Wentzel

Prior research demonstrates a positive relationship between information asymmetry and managers’ use of budgetary slack and thereby suggests that minimizing managers…

Abstract

Prior research demonstrates a positive relationship between information asymmetry and managers’ use of budgetary slack and thereby suggests that minimizing managers’ private information is a potential tactic for reducing slack in budgets. Asymmetric information, however, often cannot be avoided when specialized technical expertise is required to operate a particular responsibility area. This study contributes to the literature by investigating whether favorable perceptions of fairness mitigate managers’ use of budgetary slack during participative environments in which managers hold private information. Overall, the findings demonstrate the benefits of fair budgeting practices. In particular, survey results suggest that the presence of budgetary slack in efficiency targets is lower for managers who hold favorable fairness perceptions. A gender effect is also demonstrated between perceptions of fairness and the presence of budgetary slack in spending targets. Factor analytical evidence toward the development of a more refined measure of budgetary slack is provided.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-0-76231-139-2

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Article
Publication date: 1 January 1980

E.A. Lowe and I. Shahin

An account is presented of part of an extensive empirical research project concerned with the role of the internal auditing function within enterprises. The main focus of…

Abstract

An account is presented of part of an extensive empirical research project concerned with the role of the internal auditing function within enterprises. The main focus of this paper is upon the propensity for bias in the information flows of the budgetary control process. A model of the “traditional” budget process is modified successively to take account firstly of the presence of information bias and secondly of the function of internal auditing as a process of feedback and “counterbias”. Further discussions of the implications for the role of the internal auditor within this context together with some prognostic conclusions are then presented.

Details

Managerial Finance, vol. 5 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 May 2004

Desmond C.Y. Yuen

This study examines the relationship between a number of goal characteristics and the propensity of divisional managers to create budgetary slack. These goal…

Abstract

This study examines the relationship between a number of goal characteristics and the propensity of divisional managers to create budgetary slack. These goal characteristics are variables in goal clarity and goal difficulty. Managers also consider communication and reward systems – which are significant factors affecting the relationship between goal characteristics and propensity to create budget slack. The communication and reward systems are affected by influencing power of managers, required explanation of budget variance, budgetary feedback, peer relations, and relationship between superiors and subordinates. Using a sample of 108 hotel managers in Macau, the findings indicate that the clear communication and reward systems can result in goal clarity and can help to solve budgeting problems under difficult goal situations. The implications of these findings are discussed in relation to the design of budgeting systems. The need to integrate results and develop frameworks for future research is noted.

Details

Managerial Auditing Journal, vol. 19 no. 4
Type: Research Article
ISSN: 0268-6902

Keywords

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