Influence of budgetary slack and elements of the budgetary process on perceptions of justice
DOI:
https://doi.org/10.1590/1808-057x202113780Keywords:
budgetary slack, budgetary participation, budgetary goals, distributive justice, procedural justiceAbstract
This study examined the relationships between elements of the budgetary process (budgetary participation, the use of budgetary goals for performance assessments, and the use of budgetary goals for variable remuneration purposes), budgetary slack, and perceptions of justice, on the assumption that budgetary slack is an antecedent of perceptions of justice and acts as an intervening variable between elements of the budgetary process and perceptions of justice. Studies addressing the relationship between justice and slack have not considered the positive aspects derived from budgetary slack such as
necessary and emergency resources. Moreover, most of these studies have focused on procedural justice and on an element of the budgetary process (budgetary participation), to predict feelings of justice and the creation of slack. The results of the study suggest alternative conceptions for analyzing the relationship between perceptions of justice and budgetary slack, going beyond the economic lens for the latter. By resorting to social exchange theory (SET), a perspective is provided on how elements of the budgetary process affect managers’ perceptions of justice and how budgetary slack, as an economic
and social exchange resource, shapes those effects. Although researchers have already pointed to budgetary slack as being beneficial for the organization, no studies were found that have analyzed it as a predictor of perceptions of justice. A survey was conducted with a sample of 114 company managers and the hypotheses were tested with the application of structural equation modeling. The results reveal that budgetary slack is an inherent element of the budgetary process, conceived as an economic and socioemotional resource, according to the principles of SET, and used by organizations with a view to
greater perceptions of justice. Budgetary slack is essential for predicting managers’ feelings of distributive and procedural
justice regarding the budgetary process.
Downloads
References
Argyris, C. (1952). The impact of budgets on people. Controllership foundation.
Arnold, M., & Artz, M. (2019). The use of a single budget or separate budgets for planning and performance evaluation. Accounting, Oganizations and Society, 73(1), 50-67.
Baerdemaeker, J., & Bruggeman, W. (2015). The impact of participation in strategic planning on managers’ creation of budgetary slack: The mediating role of autonomous motivation and effective organisational commitment. Management Accounting Research, 29(1), 1-12.
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182.
Beck, F., & Beuren, I. M. (no prelo). The interface of organisational slack with innovation: a study of a textile company. International Journal of Business Innovation and Research. https://doi.org/10.1504/IJBIR.2020.10035592
Beuren, I. M., & Santos, V. (no prelo). Organisational justice perception and job satisfaction of professors. International Journal of Business Excellence
Blau, P. M. (1964). Exchange and power in social life. Transaction Publishers.
Chin, W. W. (1998). The partial least squares approach to structural equation modeling. Modern Methods for Business Research, 295(2), 295-336.
Chong, V. K., & Strauss, R. (2017). Participative budgeting: The effects of budget emphasis, information asymmetry and procedural justice on slack-additional evidence. Asia-Pacific Management Accounting Journal, 12(1), 181-220.
Chow, C. W., Cooper, J. C., & Haddad, K. (1991). The effects of pay schemes and ratchets on budgetary slack and performance: A multiperiod experiment. Accounting, Organizations and Society, 16(1), 47-60.
Colquitt, J. A., Scott, B. A., Rodell, J. B., Long, D. M., Zapata, C. P., Conlon, D. E., & Wesson, M. J. (2013). Justice at the millennium, a decade later: A meta-analytic test of social exchange and affect-based perspectives. Journal of Applied Psychology, 98(2), 199-236.
Cropanzano, R., & Mitchell, M. S. (2005). Social exchange theory: An interdisciplinary review. Journal of Management, 31(6), 874-900.
Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Prentice-Hall.
Davila, T., & Wouters, M. (2005). Managing budget emphasis through the explicit design of conditional budgetary slack. Accounting, Organizations and Society, 30(1), 587-608.
Derfuss, K. (2012). Budget slack: Some meta-analytic evidence. http://www.managementcontrolassociation.ac.uk/wp-content/uploads/main-2016-full/mcafull-derfuss.pdf
Dunk, A. S. (1993). The effect of budget emphasis and information asymmetry on the relation between budgetary participation and slack. Accounting Review, 68(2), 400-410.
Dunk, A. S., & Nouri, H. (1998). Antecedents of budgetary slack: A literature review and synthesis. Journal of Accounting Literature, 17(1), 72-96.
Elmassri, M., & Harris, E. (2011). Rethinking budgetary slack as budget risk management. Journal of Applied Accounting Research, 12(3), 278-293.
Hair, J. F., Jr., Hult, G. T. M., Ringle, C., & Sarstedt, M. (2016). A primer on partial least squares structural equation modeling (PLS-SEM). Sage.
Kramer, S., & Hartmann, F. (2014). How top‐down and bottom‐up budgeting affect budget slack and performance through social and economic exchange. Abacus, 50(3), 314-340.
Langevin, P., & Mendoza, C. (2013). How can management control system fairness reduce managers’ unethical behaviours? European Management Journal, 31(3), 209-222.
Lau, C. M., & Tan, S. L. C. (2012). Budget targets as performance measures: The mediating role of participation and procedural fairness. In Epstein, M. J., & Lee, J. Y. (eds.). Advances in management accounting (Vol. 20, pp. 151-185). Emerald.
Leach-López, M. A., Stammerjohan, W. W., & McNair, F. M. (2007). Differences in the role of job-relevant information in the budget participation-performance relationship among US and Mexican managers: A question of culture or communication. Journal of Management accounting Research,19(1), 105-136.
Liessem, T., Schedlinsky, I., Schwering, A., & Sommer, F. (2015). Budgetary slack under budget – based incentive schemes – the behavioral impact of social preferences, organizational justice, and moral disengagement. Journal of Management Control, 26(1), 81-94.
Lindquist, T. M. (1995). Fairness as an antecedent to participative budgeting: Examining the effects of distributive justice, procedural justice and referent cognitions on satisfaction and performance. Journal of Management Accounting Research,7(1), 122-147.
Little, H. T., Magner, N. R., & Welker, R. B. (2002). The fairness of formal budgetary procedures and their enactment: Relationships with managers’ behavior. Group & Organization Management, 27(2), 209-225.
Lukka, K. (1988). Budgetary biasing in organizations: theoretical framework and empirical evidence. Accounting Organizations and Society, 13(3), 281-301.
Maiga, A. S., & Jacobs, F. (2007). Budget participation’s influence on budget slack: The role of fairness perceptions, trust and goal commitment. Journal of Applied Management Accounting Research, 5(1), 39-58.
Merchant, K. A. (1985). Budgeting and the propensity to create budgetary slack. Accounting, Organizations and Society, 10(2), 201-210.
Merchant, K. A. (1990). The effects of financial controls on data manipulation and management myopia. Accounting, Organizations and Society, 15(4), 297-313.
Milani, K. (1975). The relationship of participation in budget-setting to industrial supervisor performance and attitudes: A field study. The Accounting Review, 50(2), 274-284.
Mucci, D. M., Beck, F., & Frezatti, F. (2021). Configurações do processo orçamentário: análise de empresas que atuam no Brasil. Revista de Educação e Pesquisa em Contabilidade, 15(1), 9-109.
Nouri, H. (1994). Using organizational commitment and job involment to predict budgetary lack: A research note. Accounting, Organizations and Society, 19(3), 289-295.
Onsi, M. (1973). Factor analysis of behavioral variables affecting budgetary slack. The accounting Review, 48(3), 535-548.
Özer, G., & Yilmaz, E. (2011). Effects of procedural justice perception, budgetary control effectiveness and ethical work climate on propensity to create budgetary slack. Business and Economics Research Journal, 2(4), 1-18.
Ringle, C. M., Silva, D., & Bido, D. S. (2014). Modelagem de equações estruturais com utilização do SmartPLS. Revista Brasileira de Marketing, 13(2), 56-73.
Rupp, D. E., & Cropanzano, R. (2002). The mediating effects of social exchange relationships in predicting workplace outcomes from multifoci organizational justice. Organizational Behavior and Human Decision Processes, 89(1), 925-946.
Santos, V., Beuren, I. M., & Marques, L. (2021). Desenho e uso justos do processo orçamentário e desempenho gerencial. Revista Contabilidade & Finanças, 32(85), 29-45.
Schiff, M., & Lewin, A. Y. (1970). The impact of budgets on people. The Accounting Review, 45 (2), 259-268.
Schoute, M., & Wiersma, E. (2011). The relationship between purposes of budget use and budgetary slack. In Epstein, M. J., & Lee, J. Y. (eds.). Advances in management accounting (Vol. 19, pp. 75-107). Emerald.
Sungu, L. J., Weng, Q. D., & Kitule, J. A. (2019). When organizational support yields both performance and satisfaction. Personnel Review, 48(6), 1410-1428.
Van der Stede, W. A. (2000). The relationship between two consequences of budgetary controls: Budgetary slack creation and managerial short-term orientation. Accounting, Organizations and Society, 25(6), 609-622.
Vanacker, T., Collewaert, V., & Zahra, S. A. (2017). Slack resources, firm performance, and the institutional context: Evidence from privately held European firms. Strategic Management Journal, 38(6), 1305-1326.
Webb, R. A. (2002). The impact of reputation and variance investigations on the creation of budgetary slack. Accounting, Organizations and Society, 27(1), 361-378.
Wentzel, K. (2002). The influence of fairness perceptions and goal commitment on managers’ performance in a budget setting. Behavioral Research in Accounting, 14(1), 247-271.
Wentzel, K. (2004). Do perceptions of fairness mitigate managers’ use of budgetary slack during asymmetric information conditions? Advances in Management Accounting, 13(1), 223-244.
Yuen, D. C. (2004). Goal characteristics, communication and reward systems, and managerial propensity to create budgetary slack. Managerial Auditing Journal, 19(4), 517-532.
Downloads
Published
Issue
Section
License
Copyright (c) 2022 Revista Contabilidade & Finanças
This work is licensed under a Creative Commons Attribution 4.0 International License.
The content of the article(s) published in the RC&F are of the entire liability of the authors, including with regard to the truth, updating and accuracy of data and information. The authors shall assign the rights in advance to the Department of Accounts and Actuarial Sciences of the FEA/USP, which shall permit the publication of extracts or of the whole, with prior permission, provided that the source is cited (Creative Commons – CCBY).
RC&F shall not charge a fee for the submission of articles. The submission of articles to RC&F shall imply that the author(s) authorizes/authorize its publication without the payment of author’s rights.
The submission of articles shall authorize the RC&F to adjust the text of the article(s) to their publication formats and if necessary, to make spelling, grammar and regulatory changes.
