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

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  • Christian Daumoser

    () (ESCP Europe)

  • Bernhard Hirsch

    () (Bundeswehr University Munich)

  • Matthias Sohn

    () (Zeppelin University)

Abstract

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.

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  • Christian Daumoser & Bernhard Hirsch & Matthias Sohn, 2018. "Honesty in budgeting: a review of morality and control aspects in the budgetary slack literature," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(2), pages 115-159, August.
  • Handle: RePEc:spr:jmgtco:v:29:y:2018:i:2:d:10.1007_s00187-018-0267-z
    DOI: 10.1007/s00187-018-0267-z
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    Keywords

    Honesty; Budgeting; Budgetary slack; Managerial reporting;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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