Search results

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.

This chapter examines the effects of the value attainment and cognitive roles of budgetary participation on job performance. A structural model consisting of variables such as budgetary participation, job-relevant information, job satisfaction, and job performance is proposed and tested using a survey questionnaire on 70 senior managers, drawn from a cross-section of the financial services sector. Their responses are analyzed using a structural equation modeling (SEM) technique. The results reveal that budgetary participation is positively associated with job-relevant information. These results lend support to the cognitive effect of budgetary participation, which suggests that subordinates participate in the budget setting process to share information. In addition, the results suggest that budgetary participation is positively associated with job satisfaction. These results support the value attainment role of budgetary participation, which increases subordinates’ levels of job satisfaction. Furthermore, the results reveal that there are positive relationships between job-relevant information and job satisfaction, job-relevant information and job performance, and job satisfaction and job performance.

This chapter examines the effect of mutual monitoring and the personality trait of need for achievement on subordinates’ budgetary-slack creation in a team-based environment. Experimental results show that the creation of budgetary slack is lower when mutual monitoring is present than when it is absent. The results also show that a two-way interaction between mutual monitoring and the personality trait of need for achievement affects subordinates’ budgetary-slack creation.

This paper examines the effectiveness of the reliance on a leader’s reputation as an informal control tool to mitigate subordinates’ budgetary slack. In addition, it seeks to explain whether this relationship is mediated by subordinates’ truthfulness in revealing their private information.

A laboratory experiment was conducted involving 60 undergraduate business students who participated in the experiment. A 1 × 2 between-subjects design was employed for the experimental study. Each subject assumed the role of a production manager responsible for setting a budget target. The experimental task employed involved a simple decoding task adapted from Chow (1983).

The results of this study indicate that budgetary slack is lower when a leader’s reputation is favourable than when it is unfavourable. In addition, it is found that subordinates’ truthfulness in revealing private information fully mediates the relationship between a leader’s reputation and budgetary slack.

This paper extends the limited literature on the reliance of informal controls in mitigating budgetary slack by examining a leader’s reputation as an informal control. The findings of this study provide important implications for the design of effective management control systems.