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1 – 10 of over 2000Alpo 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.
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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.
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 with the…
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.
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 emerging…
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.
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.
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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…
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.
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…
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.
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This study examines how two important situational factors (corporate diversification and business unit strategy) and two elements of a firm’s administrative system…
Abstract
This study examines how two important situational factors (corporate diversification and business unit strategy) and two elements of a firm’s administrative system (accounting‐based budgetary controls and associated incentives) affect the presence of slack in business unit budgets in diversified firms. The relationships among these variables are established by building on theories from organizational economics, the information‐processing view of organizations, and organizational behavior. Data are collected from 37 firms and 153 business units within these firms. The main results indicate: that corporate diversification is positively associated with slack in business unit budgets; and that tight budgetary controls and high‐powered incentives effectively curtail such slack. However, diversification does not seem to drive corporate managers to rely more on these systems to reduce higher budgetary slack associated with diversification. This suggests: that diversified firms employ a conscious strategy of slack at the business unit level to reduce information‐processing needs at the top; or that the design of the internal management control system is a function of factors other than corporate diversification. With respect to the latter explanation, the results indicate that business units that pursue a differentiation strategy receive less tight budgetary controls, which leaves them with the necessary slack to effectively pursue the critical success factors on which their strategies are built.
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Moataz Elmassri and Elaine Harris
The 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…
Abstract
Purpose
The 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/approach
A 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.
Findings
The 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/implications
The 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 implications
If 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/value
The 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.
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Ever since its introduction, the concept of organisational slack has constituted the basis for a considerable body of research within behavioural science. A great deal of this…
Abstract
Ever since its introduction, the concept of organisational slack has constituted the basis for a considerable body of research within behavioural science. A great deal of this research has concentrated on budgetary slack, and within the field of public administration the focus has been on the slack‐ or budget‐maximising bureaucrat. As the reduction of slack is the purpose of many of the techniques which are part of the new public management, there is a need to focus on how to measure changes in the level of slack. The objective of this paper is to discuss the relationship between three central concepts within the research on slack: organizational slack, budgetary slack, and the discretionary budget; to assess whether these concepts are suitable for public organizations; and to discuss problems of measurement.
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