Deceptive Superiors and Budgetary Reporting: An Experimental Investigation

Posted: 10 Jun 2014 Last revised: 30 Aug 2016

See all articles by Alisa Gabrielle Brink

Alisa Gabrielle Brink

Virginia Commonwealth University

Jennifer C. Coats

Colorado State University, Fort Collins

Frederick W. Rankin

Colorado State University, Fort Collins - College of Business

Date Written: June 6, 2014

Abstract

This study examines behavior in a budgeting setting where a superior has private information regarding the accuracy of the firm’s cost system, which she may misrepresent in an effort to elicit more truthful budget proposals from subordinates. We explore two features of this budgeting setting. First, the signal type regarding the accuracy of the firm’s cost system is either public information or private information of the superior. We also compare the cases where either the subordinate or the superior has final budget authority. Results indicate that superiors strategically misrepresent their private information in an attempt to reduce the creation of slack. Further, having a private accuracy signal reduces slack when subordinates unilaterally set their budgets, but not when superiors have final budget authority.

Keywords: Participative Budgeting, Budgetary Slack, Cost System, Experiment

JEL Classification: C90; D82; M41; M55

Suggested Citation

Brink, Alisa Gabrielle and Coats, Jennifer C. and Rankin, Frederick W., Deceptive Superiors and Budgetary Reporting: An Experimental Investigation (June 6, 2014). AAA 2015 Management Accounting Section (MAS) Meeting, Available at SSRN: https://ssrn.com/abstract=2447022 or http://dx.doi.org/10.2139/ssrn.2447022

Alisa Gabrielle Brink

Virginia Commonwealth University ( email )

301 W. Main St.
PO Box 844000
Richmond, VA 23284
United States

Jennifer C. Coats

Colorado State University, Fort Collins ( email )

Fort Collins, CO 80523-1771
United States

Frederick W. Rankin (Contact Author)

Colorado State University, Fort Collins - College of Business ( email )

Fort Collins, CO 80523
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,601
PlumX Metrics