Budgetary Slack Will Not Let Organization Die: Explaining Motivational and Stewardship Aspects of Conditional Slack
Abstract
The study aims to explore the motivational and stewardship aspects of managing budgetary slack. The stream of research demonstrates that budgetary slack is one of the dysfunctional behaviours which may be detrimental to an organization. The research delivers empirical evidence that organizations in the Boston Quadrant Matrix “Dogs” position are inclined to deliberately carry out additional financial resource budgeting through budgetary slack mechanism through cost assumption. The research used a qualitative method using a study-case approach and interpretive paradigm. The research area was a business industry in the Boston Quadrant Matrix “Dogs” position. The results indicate budgetary slack’s motivational aspects prompting the management to more significantly orient instead of only achieving cost budgeting targets. Cost budget target fulfilment could have been more rational when confronting non-financial orientations, i.e., product quality and going concerned. It accorded with stewardship theory that budgetary slack facilitated the management facing other goals besides budget-related ones. This research expands on previous research by showing that budgetary slack allowed the management to balance goals when external conditions change. It was a deliberate product, even a base for a budgeting system through its underlying cost assumption.
Keywords: budgetary slack, quadrant boston matrix, budgeting, going concern, stewardship
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References
Abdullah, I., & Brink, A. G. (2017). The Influence of Horizontal Equity, Self-Efficacy, and Ethical Position on the Creation of Budgetary Slack. Journal of Theoretical Accounting Research, 12(2), 3–27.
Anthony, R. N., & Govindarajan, V. (2007). Management control system. New York: McGraw-Hill.
Atkinson, A. R., Kaplan, R. S., & Young, S. M. (2004). Management Accounting. 4nd ed. New Jersey: Prentice Hall Inc., 2004.
Braun, & Tietz, W. M. (2018). Managerial accounting. New York, NY: Pearson.
Brownell, P., & Dunk, A. S. (1991). Task uncertainty and its interaction with budgetary participation and budget emphasis: Some methodological issues and empirical investigation. Accounting, Organizations and Society, 16(8), 693–703.
Carter, W. K. (2015). Cost Accounting.
Ceri-Booms, M., Curşeu, P. L., & Oerlemans, L. A. (2017). Task and person-focused leadership behaviors and team performance: a meta-analysis. Human Resource Management Review, 27(1), 178–192.
Chen, Y., & Xede, J. (2022). The effect of frontline employee participation in strategic planning on managers’ budget slack creation and evaluation: a lab-in-the-field experiment. Spanish Journal of Finance and Accounting/Revista Española de Financiación y Contabilidad, 1–31.
Chong, V. K., & Ferdiansah, I. (2012). An Experimental Investigation on the Effect of Feedback Control Policy and Need for Achievement on Subordinates’ Budgetary Slack Creation. Asia-Pacific Management Accounting Journal, 7(1).
Chong, V. K., & Loy, C. Y. (2015). The Effect of a Leader’s Reputation on Budgetary Slack. Advances in Management Accounting, 49–102.
Davidson, & Stevens, D. E. (2013). Can a Code of Ethics Improve Manager Behavior and Investor Confidence? An Experimental Study. The Accounting Review, 88(1), 51–74.
Davila, T., & Wouters, M. (2005). Managing budget emphasis through the explicit design of conditional budgetary slack. Accounting, Organizations and Society, 30, 587–608.
Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Acad. Manag. Rev. 22.
Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Aust. J. Manag, 49–66.
Drake, A. R., Matuszewski, L. J., & Miller, F. (2014). The effect of personality traits and fairness on honesty in managerial reporting. Advances in Management Accounting, 22, 43–69.
Dunk, A. S. (1995). The joint effects of budgetary slack and task uncertainty on subunit performance. Accounting and Finance, 30(2), 61–75.
Fisher, J. G., Peffer, S. A., Sprinkle, G. B., & Williamson, M. G. (2015). Performance target levels and effort: Reciprocity across single-and repeated-interaction settings. Journal of Management Accounting Research, 27(2), 145–164.
Gago-Rodríguez, S., & Naranjo-Gil, D. (2016). Effects of trust and distrust on effort and budgetary slack: an experiment. Management Decision. 54(8), 1908–1928.
Gallani, S., Krishman, R., Marinich, E. J., & Shields, M. D. (2019). Budgeting, psychological contracts, and budgetary misreporting.
Garrison, R. H., & Noreen, E. W. (2003). Managerial Accounting. 12th ed. USA: McGraw Hill Co., Inc.
Hall, M. (2008). The effect of comprehensive performance measurement systems on role clarity, psychological empowerment and managerial performance. Accounting, Organizations and Society, 33(2–3), 141–163.
Hartmann, F., & Kramer, S. (2014). How topdown and bottom-up budgeting affect budget slack and performance through social and economic exchange. A Journal of Accounting Finance and Business, 50(3), 314–340.
Hobson, J. L., Mellon, M. J., & Stevens, D. E. (2011). Determinants of moral judgments regarding budgetary slack: an experimental examination of pay scheme and personal values. Behavioral Research in Accounting, 23(1), 87–107.
Huang, C. L., & Chen, M. L. (2010). Playing devious games, budget-emphasis in performance evaluation, and attitudes towards the budgetary process. Management Decision, 48(6), 940–951.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. J. Financ. Econ, 3(3), 305–260.
Kaplan, R. S., & Norton, D. P. (1996). Translating Strategy into Action: The Balanced Scorecard.
Kaplan, R. S., & Norton, D. P. (2000). The Strategy Focused Organization: How Balanced Scorecard CompaniesThrive in the New Business Environtment.
Kleine, C., & Weißenberger, B. E. (2014). Leadership impact on organizational commitment: the mediating role of management control systems choice. Journal of Management Control, 24(3), 241–266.
Koomson, T. A. A., Owusu, G. M. Y., Bekoe, R. A., & Oquaye, M. (2020). Determinants of asset misappropriation at the workplace: the moderating role of perceived strength of internal controls. J. Financ. Crime, 27, 1191–1211.
Kung, F., Huang, C., & Cheng, C. (2013). An examination of the relationships among budget emphasis, budget planning models and performance. Management Decision, 51(1), 120–140.
Lee, S., Costello, F. J., & Lee, K. C. (2021). Hierarchical balanced scorecard-based organizational goals and the efficiency of controls processes. Journal of Business Research, 132, 270–288.
Li, H., An, N., & Liu, J. (2021). Strategic planning, strategy map and management control: a case study.
Libby, T., & Lindsay, R. M. (2010). Beyond budgeting or budgeting reconsidered? A survey of NorthAmerican budgeting practice. Management Accounting Research, 21(1), 56–75.
Lillis, A. M. (2002). Managing multiple dimensions of manufacturing performance––An exploratory study. Accounting, Organizations and Society, 27, 497–529.
Ludigdo, U. (2013). Asumsi Dasar Paradigma Interpretif.
Lukka, K. (1988). Budgetary biasing in organizations: Theoretical framework and empirical evidence. Accounting, Organizations and Society, 13, 281–302.
Maiga, & Jacobs. (2008). The moderating effect of manager’s ethical judgment on the relationship between budget participation and budgetary slack. Advances in Accounting, 23(07), 113–145.
Merchant, & Manzoni. (1989). No Title.
Miles, B., M., Huberman, A. M., & Johnny, S. (2014). Qualitative Data Analysis Fourth Edition. Arizona State University, USA.
Moleong, L. J. (2007). Metodologi Penelitian Kualitatif. Bandung : PT Remaja Rosdakarya.
Nottar, D. I. da S., Schiavo., P. dos S., Vesco., D. G. D., & Santos, C. A. dos. (2022). The effect of the dark triad traits on the relationship between obedience pressure and budgetary slack. Rev. Contab. Finanç, 33(90).
Prayudi, M. A., & Dharmawan, N. A. S. (2018). Does the Level ofReligiosity Determine BudgetarySlacks Behavior as the Result ofSuperrior’s Pressure? Journal of Economics, Business, and Goventment Challenges, 1(2), 103–115.
Rankin, F. W., Schwartz, S. T., & Young, R. A. (2008). The Effect of Honesty and Superior Authority on Budget Proposals. The Accounting Review, 83(4), 1083–1099.
Robey, S. L., McKnight, M. A., Thomas, R. B., & Mings, A. L. (2022). Horizontal equity, self-efficacy, and budgetary slack: comparing american and brazilian cultures. International Journal of Accounting & Finance Review, 11(1), 59–68.
Rohma, F. F. (2022). Rohma, F. F. International Journal of Business Science & Applied Management, 17(3).
Rohma, F. F., & Sholihah. (2022). Rohma, F. F. & Sholihah. Neo Journal of Economy and Social Humanities, 1(2), 105–109.
Santos, V. D., Beuren, I. M., & Skrepits, S. (2022). Influence of budgetary slack and elements of the budgetary process on perceptions of justice. R. Cont. Fin. – USP, São Paulo, 33(89), 200–215.
Shields, J. F., & Shields, M. D. (1998). Antecedents of participative budgeting. Accounting, Organizations and Society, 23(1), 49–76.
Sholihin, M., Pike, R., & Mangena, M. (2010). Reliance on multipleperformance measures and manager performance. Journal of Applied Accounting Research, 11(1), 24–42.
Spekle, R. F., & Verbeeten, F. H. . (2014). The use of performance measurement systems in the public sector: Effects on performance. Journal of Management Accounting Research, 25, 131–146.
Stede, W. A. Van der. (2000). The relationship between two consequences of budgetary controls: Budgetary slack creation and managerial short-term orientation. Accounting, Organizations and Society, 25, 483–496.
Supriyono R.A. (2000). Sistem Pengendalian Manajemen. Yogyakarta: BPFE.
Yin, K. R. (2013). Studi Kasus Desain & Metode. Jakarta: PT. Raja Grafindo Persada.
Anthony, R. N., & Govindarajan, V. (2007). Management control system. New York: McGraw-Hill.
Atkinson, A. R., Kaplan, R. S., & Young, S. M. (2004). Management Accounting. 4nd ed. New Jersey: Prentice Hall Inc., 2004.
Braun, & Tietz, W. M. (2018). Managerial accounting. New York, NY: Pearson.
Brownell, P., & Dunk, A. S. (1991). Task uncertainty and its interaction with budgetary participation and budget emphasis: Some methodological issues and empirical investigation. Accounting, Organizations and Society, 16(8), 693–703.
Carter, W. K. (2015). Cost Accounting.
Ceri-Booms, M., Curşeu, P. L., & Oerlemans, L. A. (2017). Task and person-focused leadership behaviors and team performance: a meta-analysis. Human Resource Management Review, 27(1), 178–192.
Chen, Y., & Xede, J. (2022). The effect of frontline employee participation in strategic planning on managers’ budget slack creation and evaluation: a lab-in-the-field experiment. Spanish Journal of Finance and Accounting/Revista Española de Financiación y Contabilidad, 1–31.
Chong, V. K., & Ferdiansah, I. (2012). An Experimental Investigation on the Effect of Feedback Control Policy and Need for Achievement on Subordinates’ Budgetary Slack Creation. Asia-Pacific Management Accounting Journal, 7(1).
Chong, V. K., & Loy, C. Y. (2015). The Effect of a Leader’s Reputation on Budgetary Slack. Advances in Management Accounting, 49–102.
Davidson, & Stevens, D. E. (2013). Can a Code of Ethics Improve Manager Behavior and Investor Confidence? An Experimental Study. The Accounting Review, 88(1), 51–74.
Davila, T., & Wouters, M. (2005). Managing budget emphasis through the explicit design of conditional budgetary slack. Accounting, Organizations and Society, 30, 587–608.
Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Acad. Manag. Rev. 22.
Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Aust. J. Manag, 49–66.
Drake, A. R., Matuszewski, L. J., & Miller, F. (2014). The effect of personality traits and fairness on honesty in managerial reporting. Advances in Management Accounting, 22, 43–69.
Dunk, A. S. (1995). The joint effects of budgetary slack and task uncertainty on subunit performance. Accounting and Finance, 30(2), 61–75.
Fisher, J. G., Peffer, S. A., Sprinkle, G. B., & Williamson, M. G. (2015). Performance target levels and effort: Reciprocity across single-and repeated-interaction settings. Journal of Management Accounting Research, 27(2), 145–164.
Gago-Rodríguez, S., & Naranjo-Gil, D. (2016). Effects of trust and distrust on effort and budgetary slack: an experiment. Management Decision. 54(8), 1908–1928.
Gallani, S., Krishman, R., Marinich, E. J., & Shields, M. D. (2019). Budgeting, psychological contracts, and budgetary misreporting.
Garrison, R. H., & Noreen, E. W. (2003). Managerial Accounting. 12th ed. USA: McGraw Hill Co., Inc.
Hall, M. (2008). The effect of comprehensive performance measurement systems on role clarity, psychological empowerment and managerial performance. Accounting, Organizations and Society, 33(2–3), 141–163.
Hartmann, F., & Kramer, S. (2014). How topdown and bottom-up budgeting affect budget slack and performance through social and economic exchange. A Journal of Accounting Finance and Business, 50(3), 314–340.
Hobson, J. L., Mellon, M. J., & Stevens, D. E. (2011). Determinants of moral judgments regarding budgetary slack: an experimental examination of pay scheme and personal values. Behavioral Research in Accounting, 23(1), 87–107.
Huang, C. L., & Chen, M. L. (2010). Playing devious games, budget-emphasis in performance evaluation, and attitudes towards the budgetary process. Management Decision, 48(6), 940–951.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. J. Financ. Econ, 3(3), 305–260.
Kaplan, R. S., & Norton, D. P. (1996). Translating Strategy into Action: The Balanced Scorecard.
Kaplan, R. S., & Norton, D. P. (2000). The Strategy Focused Organization: How Balanced Scorecard CompaniesThrive in the New Business Environtment.
Kleine, C., & Weißenberger, B. E. (2014). Leadership impact on organizational commitment: the mediating role of management control systems choice. Journal of Management Control, 24(3), 241–266.
Koomson, T. A. A., Owusu, G. M. Y., Bekoe, R. A., & Oquaye, M. (2020). Determinants of asset misappropriation at the workplace: the moderating role of perceived strength of internal controls. J. Financ. Crime, 27, 1191–1211.
Kung, F., Huang, C., & Cheng, C. (2013). An examination of the relationships among budget emphasis, budget planning models and performance. Management Decision, 51(1), 120–140.
Lee, S., Costello, F. J., & Lee, K. C. (2021). Hierarchical balanced scorecard-based organizational goals and the efficiency of controls processes. Journal of Business Research, 132, 270–288.
Li, H., An, N., & Liu, J. (2021). Strategic planning, strategy map and management control: a case study.
Libby, T., & Lindsay, R. M. (2010). Beyond budgeting or budgeting reconsidered? A survey of NorthAmerican budgeting practice. Management Accounting Research, 21(1), 56–75.
Lillis, A. M. (2002). Managing multiple dimensions of manufacturing performance––An exploratory study. Accounting, Organizations and Society, 27, 497–529.
Ludigdo, U. (2013). Asumsi Dasar Paradigma Interpretif.
Lukka, K. (1988). Budgetary biasing in organizations: Theoretical framework and empirical evidence. Accounting, Organizations and Society, 13, 281–302.
Maiga, & Jacobs. (2008). The moderating effect of manager’s ethical judgment on the relationship between budget participation and budgetary slack. Advances in Accounting, 23(07), 113–145.
Merchant, & Manzoni. (1989). No Title.
Miles, B., M., Huberman, A. M., & Johnny, S. (2014). Qualitative Data Analysis Fourth Edition. Arizona State University, USA.
Moleong, L. J. (2007). Metodologi Penelitian Kualitatif. Bandung : PT Remaja Rosdakarya.
Nottar, D. I. da S., Schiavo., P. dos S., Vesco., D. G. D., & Santos, C. A. dos. (2022). The effect of the dark triad traits on the relationship between obedience pressure and budgetary slack. Rev. Contab. Finanç, 33(90).
Prayudi, M. A., & Dharmawan, N. A. S. (2018). Does the Level ofReligiosity Determine BudgetarySlacks Behavior as the Result ofSuperrior’s Pressure? Journal of Economics, Business, and Goventment Challenges, 1(2), 103–115.
Rankin, F. W., Schwartz, S. T., & Young, R. A. (2008). The Effect of Honesty and Superior Authority on Budget Proposals. The Accounting Review, 83(4), 1083–1099.
Robey, S. L., McKnight, M. A., Thomas, R. B., & Mings, A. L. (2022). Horizontal equity, self-efficacy, and budgetary slack: comparing american and brazilian cultures. International Journal of Accounting & Finance Review, 11(1), 59–68.
Rohma, F. F. (2022). Rohma, F. F. International Journal of Business Science & Applied Management, 17(3).
Rohma, F. F., & Sholihah. (2022). Rohma, F. F. & Sholihah. Neo Journal of Economy and Social Humanities, 1(2), 105–109.
Santos, V. D., Beuren, I. M., & Skrepits, S. (2022). Influence of budgetary slack and elements of the budgetary process on perceptions of justice. R. Cont. Fin. – USP, São Paulo, 33(89), 200–215.
Shields, J. F., & Shields, M. D. (1998). Antecedents of participative budgeting. Accounting, Organizations and Society, 23(1), 49–76.
Sholihin, M., Pike, R., & Mangena, M. (2010). Reliance on multipleperformance measures and manager performance. Journal of Applied Accounting Research, 11(1), 24–42.
Spekle, R. F., & Verbeeten, F. H. . (2014). The use of performance measurement systems in the public sector: Effects on performance. Journal of Management Accounting Research, 25, 131–146.
Stede, W. A. Van der. (2000). The relationship between two consequences of budgetary controls: Budgetary slack creation and managerial short-term orientation. Accounting, Organizations and Society, 25, 483–496.
Supriyono R.A. (2000). Sistem Pengendalian Manajemen. Yogyakarta: BPFE.
Yin, K. R. (2013). Studi Kasus Desain & Metode. Jakarta: PT. Raja Grafindo Persada.
Published
2023-01-31
How to Cite
ROHMA, Frida Fanani; CHAMALINDA, Khy'sh Nusri Leapatra.
Budgetary Slack Will Not Let Organization Die: Explaining Motivational and Stewardship Aspects of Conditional Slack.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 18, n. 1, p. 17-28, jan. 2023.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/92924>. Date accessed: 25 apr. 2024.
doi: https://doi.org/10.24843/JIAB.2023.v18.i01.p02.
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