The Effect of Frontline Employee Participation in Strategic Planning on Managers’ Budget Slack Creation and Evaluation: A Lab-in-the-Field Experiment

Forthcoming in REFC – Spanish Journal of Finance and Accounting

56 Pages Posted: 9 Aug 2022

See all articles by Yasheng Chen

Yasheng Chen

Xiamen University - Accounting Department

James Xede

Hong Kong Metropolitan University

Date Written: August 2, 2022

Abstract

We examined whether participation of frontline employees (FEs) in a firm’s strategic planning using strengths, weaknesses, opportunities, and threats (SWOT) analysis mitigates managers’ budget slack creation and whether it improves budget evaluation. Using a lab-in-the-field experiment in an agro-processing firm in Ghana, we found that FE participation in strategic planning enhanced managers’ identification of the number of internal and external factors affecting the firm, enabling the firm to better understand the environment in which the budget process is undertaken. We also found that FE participation reduced managers’ budget slack creation and bias in their performance evaluation. In an additional analysis, we found that FE participation improved managers’ budget allocation, effectively redirecting the firm’s resources to units where they were most needed. Overall, the results showed that FE participation in strategic planning improved the managers’ information environment, thereby positively influencing their choices and actions.

Keywords: frontline employee participation, strategic planning, budget slack, allocation, evaluation, lab-in-the-field experiment

JEL Classification: M40, M41

Suggested Citation

Chen, Yasheng and Xede, James, The Effect of Frontline Employee Participation in Strategic Planning on Managers’ Budget Slack Creation and Evaluation: A Lab-in-the-Field Experiment (August 2, 2022). Forthcoming in REFC – Spanish Journal of Finance and Accounting, Available at SSRN: https://ssrn.com/abstract=4180131

Yasheng Chen

Xiamen University - Accounting Department ( email )

Siming South Road
Duxing Building No.2
Xiamen, Fujian 361005
China

HOME PAGE: http://sm.xmu.edu.cn/keyan/TeacherWeb/Teacher_Details.aspx?User_ID=557

James Xede (Contact Author)

Hong Kong Metropolitan University ( email )

Lee Shau Kee School of Business and Administration
B & A
Hong Kong
Hong Kong

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