How Do Managers React to What Happens to Peers? The Influence of Workforce Change Announcements on Budgetary Reporting
37 Pages Posted: 20 Aug 2012
Date Written: August 20, 2012
In this paper, we investigate the impact of workforce change announcements affecting their own department and the department of a peer manager on managers’ budgetary reporting choices. We apply reciprocity theory to explain managers’ budgetary reporting response to announcements about his/her own department. Managers report larger budgets when they receive a workforce reduction announcement than when they receive an expansion announcement. We apply self-categorization theory to explain how managers’ budgetary reporting choices are also affected by knowledge that a peer manager faces similar or dissimilar changes in workforce. Managers who receive announcements of workforce change similar to the change announced to a peer manager report higher budgets than those who receive announcements of dissimilar workforce change. Lastly, we find that managers’ reciprocation and self-categorization have independent effects on individual decision-making in a budgetary reporting setting. This study contributes to the participative budgeting literature by demonstrating that a peer manager’s situation influences managers’ budgetary reporting. Further, these findings shed light on the impact of owners’ communication of workforce changes on opportunistic budgetary reporting.
Keywords: budgetary reporting, budgetary slack, workforce changes, reciprocity, self-categorization
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