Honesty in Budgeting: A Review of Morality and Control Aspects in the Budgetary Slack Literature

Journal of Management Control, 2018, DOI: 10.1007/s00187-018-0267-z

Posted: 6 Oct 2015 Last revised: 15 Jun 2018

See all articles by Christian Daumoser

Christian Daumoser

ESCP Europe, Berlin

Matthias Sohn

European University Viadrina Frankfurt (Oder)

Bernhard Hirsch

Bundeswehr University Munich

Date Written: March 1, 2018

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.

Keywords: Honesty, Budgeting, Budgetary slack, Managerial reporting

JEL Classification: M41

Suggested Citation

Daumoser, Christian and Sohn, Matthias and Hirsch, Bernhard, Honesty in Budgeting: A Review of Morality and Control Aspects in the Budgetary Slack Literature (March 1, 2018). Journal of Management Control, 2018, DOI: 10.1007/s00187-018-0267-z, Available at SSRN: https://ssrn.com/abstract=2670165 or http://dx.doi.org/10.2139/ssrn.2670165

Christian Daumoser (Contact Author)

ESCP Europe, Berlin ( email )

Heubnerweg 8-10
Berlin, 14059
Germany

Matthias Sohn

European University Viadrina Frankfurt (Oder) ( email )

Grosse Scharrnstr. 59
Frankfurt (Oder), Brandenburg 15230
Germany

Bernhard Hirsch

Bundeswehr University Munich ( email )

Werner-Heisenberg-Weg 39
Neubiberg, 85577
Germany

HOME PAGE: http://www.unibw.de

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