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Honesty in budgeting: a review of morality and control aspects in the budgetary slack literature

Honesty in budgeting: a review of morality and control aspects in the budgetary slack literature Budgetary slack is a heavily researched topic in the field of management accounting, but the heterogeneous nature of prior research blurs our understanding of this important topic. In this paper, we provide a structured overview of research on budgetary slack published in top-tier accounting and business ethics journals and reach the following conclusions: Participative budgeting can create or reduce budgetary slack. Less slack is created under truth-inducing pay schemes compared to slack-inducing schemes. Additionally, slack creation is affected by budget users’ risk attitudes and information asymmetry. Information asymmetry increases budgetary slack, but that effect is influenced by multiple factors, including budgetary participation and information systems. Fairness and reputation concerns decrease budgetary slack, but ethics concerns do not. Finally, the analysis revealed that social norms decrease slack and peer influence moderates the effect. We show that research in this field focuses mainly on psychological perspectives to analyse individuals’ budget-related behaviour. Experimental research was determined to be the most frequently used research method. An analysis of current experiments shows growing numbers of investigations of budgetary slack as a proxy of honesty in managerial reporting. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Management Control Springer Journals

Honesty in budgeting: a review of morality and control aspects in the budgetary slack literature

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Publisher
Springer Journals
Copyright
Copyright © 2018 by Springer-Verlag GmbH Germany, part of Springer Nature
Subject
Business and Management; Accounting/Auditing; Organization; Operations Management; Business Taxation/Tax Law; Business Strategy/Leadership
ISSN
2191-4761
eISSN
2191-477X
DOI
10.1007/s00187-018-0267-z
Publisher site
See Article on Publisher Site

Abstract

Budgetary slack is a heavily researched topic in the field of management accounting, but the heterogeneous nature of prior research blurs our understanding of this important topic. In this paper, we provide a structured overview of research on budgetary slack published in top-tier accounting and business ethics journals and reach the following conclusions: Participative budgeting can create or reduce budgetary slack. Less slack is created under truth-inducing pay schemes compared to slack-inducing schemes. Additionally, slack creation is affected by budget users’ risk attitudes and information asymmetry. Information asymmetry increases budgetary slack, but that effect is influenced by multiple factors, including budgetary participation and information systems. Fairness and reputation concerns decrease budgetary slack, but ethics concerns do not. Finally, the analysis revealed that social norms decrease slack and peer influence moderates the effect. We show that research in this field focuses mainly on psychological perspectives to analyse individuals’ budget-related behaviour. Experimental research was determined to be the most frequently used research method. An analysis of current experiments shows growing numbers of investigations of budgetary slack as a proxy of honesty in managerial reporting.

Journal

Journal of Management Control – Springer Journals

Published: Jun 1, 2018

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