The relationship between budgetary participation, budgetary slack and performance has received a great deal of attention in the literatures of management accounting. However, there is a little consistent conclusion in the relationship between budgetary participation, budgetary slack and performance. Behavior accounting researchers using the Contingent Theory in order to conciliate these inconsistent conclusions also confound contrary results (such as Merchant (1985) and Dunk (1993)). This study suggested that the perceived cause of budgetary participation and the cognitive functions of budgetary participation are important determinants of propensity to create budgetary slack and performance. In addition, this study considered the influence of procedural justice about budgetary decision on budgetary slack and performance. We proposed that there are three actions of participator in the process of participation. The first, subordinate would review the surroundings around themselves like environment uncertainty, task uncertainty, budgetary emphasis, role ambiguity and information asymmetry. The second, subordinates will think the need of functions of participation. The surrounding variables will influence the cognitive functions of participation. Finally, they will decide the subsequent action (in this study we discuss the propensity of budgetary slack and performance). We gathered data from 174 subordinate managers working in the publicly owned companies in Taiwan and used LISREL to test our hypotheses. The results of this study revealed that 1.The cause of budgetary of participation is imperative factor influencing the need of the functions of budgetary participation. The environment uncertainty, task uncertainty, role ambiguity and information asymmetry has positively direct influence on the need of informational effect of budgetary participation respectively. Budgetary emphasis has positively direct influence on the need of affective/motivational effect of budgetary participation. 2.The informational effect of budgetary participation was directive associated with budgetary slack. However, the affective/motivational effect of budgetary participation was indirectly related to budgetary slack through procedural justice. 3. The affective/motivational effect of budgetary participation was directive associated with performance. However, the informational effect of budgetary participation was indirectly related to performance through procedural justice and affective/motivational effect of budgetary participation. We anticipated that the result of this study could offer insight into the relationship between budgetary participation, slack and performance. In addition, we expect to give some suggestions to firms that implement participatory budgeting system to avoid dysfunctional behavior of employees and to encourage performance.

The budgeting process plays an important role in organizations’ planning and controlling functions. Managers often have incentives to misreport their private information and inaccurately set budget targets so that they are easily achievable. Such inaccuracy in budget targets is referred to as budgetary slack. Prior research documents that managers’ decisions to create budgetary slack are influenced by both preferences for wealth and non-pecuniary motivations. The objective of this study is to provide a better understanding of how social preferences such as preferences for horizontal equity, self efficacy perceptions, and ethical position influence managers’ budgetary slack creation. The results reveal a significant interaction between horizontal equity (equal and unequal compensation relative to a peer) and self efficacy (poor and good prior performance) on the intention to create budgetary slack. Further, this research provides evidence regarding the impact of ethical position in the relations among perceived fairness, self efficacy, and budgetary slack creation.

The creation of excessive budgetary slack can be costly, causing organizations to implement internal controls to motivate employees to report more honestly. Internal control research explores many control-related motivations; however, the behavioral effects of autonomy in expanded organizational hierarchies are not well understood in budgeting contexts. This paper examines managerial autonomy and firms’ rationales for the implementation of internal controls in a setting that extends the common participatory dyad utilized in prior literature to an organizational hierarchy that includes owners, mid-level managers, and employees. This setting is explored through the lens of self-determination theory and psychological reactance theory, which offer complementary yet opposite conceptualizations of autonomy. This paper posits that owner restrictions on mid-level manager autonomy can spillover and indirectly influence budgeting decisions. Additionally, the potential for this spillover to influence the relationship between a firm’s rationale for the implementation of internal controls and subsequent budgetary decisions is examined. Findings indicate that the autonomy of mid-level managers has a spillover effect that influences manager’s rejection rates between rounds, but not across rounds and does not interact with a firm’s control implementation rationale.

Two significant differences were found between theoretical expectation and empirical results to budgetary slack in managerial accounting study. First, subjects under the slack-inducing pay schemes set their budgets well above zero regardless of their risk-neutral or risk-averse characteristics, although their maximum rewards arise from setting their budgets at zero (Waller, 1988; Chow, Cooper, and Waller, 1988; Chow, Cooper, and Haddad, 1991). Second, theoretically subjects operating under truth-inducing pay schemes set budgets at their best estimate performance, that is, no budgetary slack. But in violation of traditional economic theory, truth-inducing pay schemes have not been found to drive all slack out of the budget (Chow, Cooper, and Haddad, 1991). These results suggest that the existence of other non-pecuniary factors impacting slack, such as personal integrity and conscience, or social pressure (Chow, Cooper, and Waller, 1988). Moreover, the other potential causes in methodology may affect the congruence with theoretical expectation: (1) single-period experimental setting may limit the subjects¡¦ learning effect (Chow, Cooper, and Haddad, 1991), or (2) social pressure that was not controlled between subjects results in measurement errors. This study investigates the impacts of pay scheme, social pressure, internal norm and organizational commitment on budgetary slack in the participative budgeting setting. Specifically, this research executes an experimental test of the effects of a truth-inducing pay scheme, superior-generated social pressure, and subordinates¡¦ intern norm and their organizational commitment on the propensity to set their budgets below expected performance. In the experimental setting budgets were participatively set under three kinds of pay scheme and under the condition of either existence of social pressure or no social pressure. Pay schemes are categorized by three factors: truth-inducing pay scheme, fixed-pay-plus-bonus pay scheme, and fixed-pay-plus-bonus pay scheme with ratchet. The social pressure manipulation involved having subordinates either personally submit their budgets and performance to a superior, or enter their budgets into a computer with no personal interaction. Moreover, internal norm and organizational commitment are measured by questionnaires built in the personal computer. The experiment was conducted by computerizing the multi-period task on the screen of man-machine interactive personal computer. To eliminate the potential social pressure, subjects in the group with no social pressure executed the computerized procedure to create a ¡¨doubled-blinded¡¨ environment where there was inter-participant anonymity (anonymity between subjects) and experimenter-participant anonymity (anonymity between experimenter and subjects), hence the effects of internal norm and organizational commitment on budgetary slack were investigated. This study tested the following hypotheses with 120 production unit managers that sampled from one manufacturing company in Kaohsiung. (1) Managers will build the least slack into their budget under a truth-inducing pay scheme, the second slack under a fixed-pay-plus-bonus pay scheme with ratchet, and the most slack under a fixed-pay-plus-bonus pay scheme. (2) Managers will build less slack into their budget as social pressure from superior is increased. (3) The difference in budgetary slack between the truth-inducing pay scheme and fixed-pay-plus-bonus pay scheme with ratchet will be reduced as social pressure from superior is increased. That is, there is an interaction between pay scheme and social pressure. (4) The level of slack built into the budget will be negatively correlated with the managers¡¦ degree of internal norm in condition of no social pressure. (5) The level of slack built into the budget will be negatively correlated with the managers¡¦ degree of organizational commitment in condition of no social pressure. The test result verified the mentioned-above hypotheses except item (1) that is partially supported. This study not only extends the management accounting literature that investigates the effects of pay schemes, but also further examines the potential effects of social pressure from superior, subordinates¡¦ internal norm and organizational commitment on budgetary slack. Especially, the results that isolated the effects of internal norm from social pressure on budgetary slack have shown the implications of personnel recruitment and managerial style in the enterprises organization.

For decades, two key characteristics in budgeting system-budgetary participation and budgetary emphasis have been intensively discussed in previous management accounting studies. Although previous literature suggested that budgetary participation and budgetary emphasis have positive effects on mangers¡¦ effectiveness, they provided inconsistent and piecemeal evidence. This study attempts to investigate the influences of budgetary participation and emphasis on managerial effectiveness and on slack and to propose a comprehensive model in order to clarify the relationships of intervening variables among budgetary participation and emphasis on managerial effectiveness and slack. This study employs social-cognitive theory (SCT) (Bandura, 1977) and affective events theory (AET) (Weiss & Cropanzano, 1996) to investigate the relationships between budgetary participation, budgetary emphasis, managerial effectiveness and budgetary slack. According to social cognitive theory, this study suggests that budgetary participation and emphasis enhance managers¡¦ self-efficacy, and then improves managerial performance and job satisfaction. According to AET, this study suggests that budgetary participation implies positive affective events which effectively influence managers¡¦ attitudes-trust in superior and organizational commitment, in turn improve their performance and satisfaction. However, budgetary emphasis is implied as a negative affective event, which may influence managers¡¦ attitudes. In other words, self-efficacy, trust in superior and organizational commitment play critical intervening roles among the relationships budgetary participation, budgetary emphasis, managerial performance, job satisfaction and budgetary slack. In addition, the relationships between the intervening variables and between outcome variables are also explored. Finally, this study proposes a comprehensive budgetary participation¡¦s ¡¥cognitive-attitude-effectiveness¡¦ model. Eighteen hypotheses are proposed. Structural equation modeling was used to test the theoretical models with the 164 responses which were randomly drawn from the listing company in Taiwan Stock Exchange. The results validate the following relationships: 1.Budgetary participation and budgetary emphasis have indirect effects on managerial performance and job satisfaction through self-efficacy. 2.Budgetary participation has indirect effects on managerial performance and job satisfaction through affective attitudes-trust in superior and organizational commitment. 3.Budgetary participation enhances self-efficacy and then improving managers¡¦ attitudes. 4.Budgetary emphasis directly influences budgetary slack. 5.Managers¡¦ trust in superior enhances their organizational commitment. 6.Managers¡¦ job satisfaction improves their performance. Although the relationship between trust in superior and managerial performance is not supported in the comprehensive model, the mediating roles of self-efficacy, trust and organizational commitment are validated. In other words, the cognitive and attitudinal effects of budgetary participation are supported in this study. However, this study suggests a positive path from budgetary slack toward job satisfyaction, which implies that proper slack may result in higher managers¡¦ job satisfaction. This study provides suggestions for future researches and management implications for practical business managements.

Most previous studies emphasized on the single consequence with respect to the effect of budgetary emphasis on budgetary slack or other dysfunctional behaviors, however, the relationships among these dysfunctional behaviors are seldom investigated. In order to understand the relationships among those dysfunctional behaviors, this study attempted to explore a structure model of past performance, perceived environment uncertainty, consideration leadership style, budgetary emphasis and three dysfunctional behaviors including budgetary slack, job-related tension and managerial short-term orientation. The empirical data was randomly drawn from 175 manufacturing managers in Taiwan Security Exchange. The empirical evidence of this research revealed as follows: 1. Managers have no incentive to create budgetary slack in a business which does not evaluate manager¡¦s performance with budgetary goal achievement. There is a significant positive relationship between past performance and budgetary slack, but the direct effect does not exist. The effect of past performance on budgetary slack is indirectly through budgetary emphasis. Similarly, perceived environment uncertainty and consideration leadership style affecting budgetary slack isn¡¦t directly but indirectly by budgetary emphasis. 2. Between budgetary slack and managerial short-term orientation, budgetary slack and job-related tension may exist a spillover effect. While reducing the propensity to build budgetary slack might induce managerial short-term orientation and job-related tension. 3. Weather no matter budget achievement evaluates performance, past performance directly influences the job-related tension. The manager whose performance is poor could have the higher job-related tension. 4. In different industry, the factor that influencing the organization to practice the budget control system is also different. In traditional industry, past performance is the important factor that affecting organization to implement the budget control system and induce the dysfunction behaviors, but perceived environment uncertainty is the important factor in the electronic information industry.

Este estudo se propõe a analisar como a combinação dos indicadores em um modelo de medida de desempenho (MMD) impacta na criação de folga orçamentária em uma organização pública. A administração pública (AP) em geral, a partir do movimento New Public Management passou a importar ferramentas e técnicas do setor privado para gerenciar suas ações. A literatura sobre medidas de desempenho no setor privado, relata que a avaliação de desempeho está relacionada à criação de folga orçamentária. Os trabalhos no setor público relatam que uma das ferramentas mais importadas do setor privado é a avaliação e medida de desempenho. Dessa forma, este trabalho verificou se um subconjunto das variáveis que influenciam na criação de folga orçamentária existe nas administrações públicas e analisa qual o impacto dessas variáveis na criação de folga orçamentária. O estudo de campo se deu na administração pública brasileira. O estudo foi baseado na análise das séries históricas (de meta e realizado) dos indicadores do MMD da Secretaria de Estado da Fazenda (Sefaz) de um estado brasileiro. Os resultados dessa análise foram triangulados com evidências obtidas por meio de entrevistas em profundidade feitas com funcionários públicos da Sefaz. Os resultados apresentados aqui não confirmam a teoria onde indicadores contábeis e relacionados a bônus estão relacionados positivamente na criação de folga orçamentária. / This study aims to analyze how the combination of indicators in a model of performance measurement (MMD) impacts on the creation of budgetary slack in a public organization. The public administration (PA) in general, from the New Public Management movement has imported tools and techniques of the private sector to manage their actions. The literature on performance measures in the private sector, reports that the evaluation of performance is related to the creation of budgetary slack. Some papers in the public sector reported that performance assessment and measurement is one of the implemented used tools from the private sector. Thus, this study examined whether a subset of variables that influence the creation of budgetary slack exists in public administration and considers what impact of these variables in the creation of budgetary slack. The field study was made in the Brazilian public administration. The study was based on analysis of historical data (goal and realized) of the indicators of MMD Brazilian State Secretary of Finance (Sefaz). The results of this analysis were triangulated with evidence obtained through in-depth interviews with public officials. The results presented here do not confirm the theory in which accounting-related and bonuses-related indicators are positively related in the creation of budgetary slack.

Organizações públicas vêm adotando modelos de mensuração de desempenho (MMD), a exemplo da iniciativa privada, buscando gerar incentivos à eficiência de equipes de servidores. Este trabalho analisou o MMD da Secretaria da Fazenda de um dos Estados do Brasil e identificou que, a partir das metas pactuadas pela equipe diretiva da secretaria, a organização opera em um regime de folga orçamentária, em um ambiente organizacional de menor tensão em relação ao atingimento das metas e consequente gratificação. Através de séries históricas (Jan./07 a Jun./09) do desempenho individual mensal de 950 servidores públicos que atuam como fiscais, foram comparados o nível de atingimento das metas tributárias e administrativas. Adicionalmente, tais evidências foram trianguladas com observações participativas e análises documentais. Apesar da folga orçamentária detectada na utilização de metas com alta probabilidade de atingimento, o desempenho nas tarefas administrativas duplicou no último ano analisado, evidência de que o nível de esforço individual cresceu apesar do incentivo pecuniário ser garantido em um nível menor de esforço. Assim, como em outras pesquisas em organizações públicas, discute-se a existência de uma motivação intrínseca no servidor. / Public organizations have been adopting performance measurement models (MMD), taking as example the private initiative, seeking to create incentives to the efficiency of servants teams. This assignment analyzed the MMD of the Department of Taxation of a Brazilian State and identified that, considering the goal agreed by the management team of the department, the organization operates in a regime of budgetary slack, in an organizational environment of lower pressure in relation of the goals achievement and consequent reward. Through historical series (Jan./07 to June/09) of the individual monthly performance of 950 civil servants acting as fiscals, it was compared the achievement level of the tributary and administrative goals. Additionally, such evidences were triangulated with participative observations and documental analysis. In spite of the budgetary slack detected in the use of goals with high achievement probability, the performance in the administrative tasks doubled in the last year analyzed, evidence that the individual effort level increased, despite the fact that the pecuniary incentive is guaranteed in a lower level of effort. Therefore, as in other researches in public organizations, it is discussed the existence of an intrinsic motivation in the servant.

Organizações públicas vêm adotando modelos de mensuração de desempenho (MMD), a exemplo da iniciativa privada, buscando gerar incentivos à eficiência de equipes de servidores. Este trabalho analisou o MMD da Secretaria da Fazenda de um dos Estados do Brasil e identificou que, a partir das metas pactuadas pela equipe diretiva da secretaria, a organização opera em um regime de folga orçamentária, em um ambiente organizacional de menor tensão em relação ao atingimento das metas e consequente gratificação. Através de séries históricas (Jan./07 a Jun./09) do desempenho individual mensal de 950 servidores públicos que atuam como fiscais, foram comparados o nível de atingimento das metas tributárias e administrativas. Adicionalmente, tais evidências foram trianguladas com observações participativas e análises documentais. Apesar da folga orçamentária detectada na utilização de metas com alta probabilidade de atingimento, o desempenho nas tarefas administrativas duplicou no último ano analisado, evidência de que o nível de esforço individual cresceu apesar do incentivo pecuniário ser garantido em um nível menor de esforço. Assim, como em outras pesquisas em organizações públicas, discute-se a existência de uma motivação intrínseca no servidor. / Public organizations have been adopting performance measurement models (MMD), taking as example the private initiative, seeking to create incentives to the efficiency of servants teams. This assignment analyzed the MMD of the Department of Taxation of a Brazilian State and identified that, considering the goal agreed by the management team of the department, the organization operates in a regime of budgetary slack, in an organizational environment of lower pressure in relation of the goals achievement and consequent reward. Through historical series (Jan./07 to June/09) of the individual monthly performance of 950 civil servants acting as fiscals, it was compared the achievement level of the tributary and administrative goals. Additionally, such evidences were triangulated with participative observations and documental analysis. In spite of the budgetary slack detected in the use of goals with high achievement probability, the performance in the administrative tasks doubled in the last year analyzed, evidence that the individual effort level increased, despite the fact that the pecuniary incentive is guaranteed in a lower level of effort. Therefore, as in other researches in public organizations, it is discussed the existence of an intrinsic motivation in the servant.

Este estudo se propõe a analisar como a combinação dos indicadores em um modelo de medida de desempenho (MMD) impacta na criação de folga orçamentária em uma organização pública. A administração pública (AP) em geral, a partir do movimento New Public Management passou a importar ferramentas e técnicas do setor privado para gerenciar suas ações. A literatura sobre medidas de desempenho no setor privado, relata que a avaliação de desempeho está relacionada à criação de folga orçamentária. Os trabalhos no setor público relatam que uma das ferramentas mais importadas do setor privado é a avaliação e medida de desempenho. Dessa forma, este trabalho verificou se um subconjunto das variáveis que influenciam na criação de folga orçamentária existe nas administrações públicas e analisa qual o impacto dessas variáveis na criação de folga orçamentária. O estudo de campo se deu na administração pública brasileira. O estudo foi baseado na análise das séries históricas (de meta e realizado) dos indicadores do MMD da Secretaria de Estado da Fazenda (Sefaz) de um estado brasileiro. Os resultados dessa análise foram triangulados com evidências obtidas por meio de entrevistas em profundidade feitas com funcionários públicos da Sefaz. Os resultados apresentados aqui não confirmam a teoria onde indicadores contábeis e relacionados a bônus estão relacionados positivamente na criação de folga orçamentária. / This study aims to analyze how the combination of indicators in a model of performance measurement (MMD) impacts on the creation of budgetary slack in a public organization. The public administration (PA) in general, from the New Public Management movement has imported tools and techniques of the private sector to manage their actions. The literature on performance measures in the private sector, reports that the evaluation of performance is related to the creation of budgetary slack. Some papers in the public sector reported that performance assessment and measurement is one of the implemented used tools from the private sector. Thus, this study examined whether a subset of variables that influence the creation of budgetary slack exists in public administration and considers what impact of these variables in the creation of budgetary slack. The field study was made in the Brazilian public administration. The study was based on analysis of historical data (goal and realized) of the indicators of MMD Brazilian State Secretary of Finance (Sefaz). The results of this analysis were triangulated with evidence obtained through in-depth interviews with public officials. The results presented here do not confirm the theory in which accounting-related and bonuses-related indicators are positively related in the creation of budgetary slack.