Main Article Content
Abstract
This study evaluates the susceptibility of management (especially management accountants) in creating budgetary slack by violating company policies. Reducing the creation of budgetary slack was evaluated by the relationship of the effects of peer pressure and perceived self-statement mechanisms within the scope of each social ethical dimension. Experimental results with 133 management accountants show that social and ethical friction can reduce the creation of budgetary slack by emphasizing peer pressure and self-assessment mechanisms. All experimental subjects could not violate company policy and it was proven by decreasing budgetary slack when faced with conditions without peer pressure and without a self-assessment mechanism. This finding provides evidence that budgetary slack is created when management is fully involved in setting the company's budget without any control from colleagues or leaders. The importance of social ethics in budgeting is raised by collegiate decisions in the team and creates a self-assessment mechanism for managers. Thus, resistance to creating budgetary slack can be increased and managers are held accountable for making budgetary decisions.
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Copyright (c) 2023 Apriwandi Apriwandi, Debbie Christine
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References
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- Baird, J., & Zelin, R. (2000). The effects of information ordering on investor perceptions: An experiment utilizing presidents’ letters. Journal of Financial and Strategic Decisions, 13(3), 71–80.
- Bicchieri, C. (2006). The grammar of society: The nature and dynamics of social norms. New York, NY: Cambridge University Press.
- Bishop, C. C., Dezoort, F. T., & Hermanson, D. R. (2017). The effect of CEO social influence pressure and CFO accounting experience on CFO financial reporting decisions. Auditing, 36(1), 21–41. https://doi.org/10.2308/ajpt-51507
- Brownell, P., & McInnes, M. (1986). Budgetary participation, motivation, and managerial performance. Accounting Review, 61(4), 587. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4479014&site=ehost-live
- Cahyaningrum, C. D., & Utami, I. (2015). Do obedience pressure and task complexity affect audit decision? Jurnal Akuntansi dan Keuangan Indonesia, 11(1), 92–105. https://doi.org/10.21002/jaki.2015.06
- Chong, V. K., & Khudzir, N. F. (2018). The effect of mutual monitoring and need for achievement on budgetary slack in a team-based environment. Advances in Accounting Behavioral Research, 21.
- Davidson, B. I., & Stevens, D. E. (2013). Can a code of ethics improve manager behavior and investor confidence? An experimental study. Accounting Review, 88(1), 51–74. https://doi.org/10.2308/accr-50272
- Davis, S., DeZoort, F. T., & Kopp, L. S. (2006). The effect of obedience pressure and perceived responsibility on management accountants’ creation of budgetary slack. Behavioral Research in Accounting, 18(1), 19–35. https://doi.org/10.2308/bria.2006.18.1.19
- De Baerdemaeker, J., & Bruggeman, W. (2015). The impact of participation in strategic planning on managers’ creation of budgetary slack: The mediating role of autonomous motivation and affective organisational commitment. Management Accounting Research, 29, 1–12. https://doi.org/10.1016/j.mar.2015.06.002
- DeZoort, F. T., & Lord, A. T. (1997). A review and synthesis of pressure effects research in accounting Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Journal of Accounting Literature, 16, 28–85.
- Douthit, J. D., & Stevens, D. E. (2015). The robustness of honesty effects on budget proposals when the superior has rejection authority. Accounting Review, 90(2), 467–493. https://doi.org/10.2308/accr-50937
- Douthit, J. D., Kearney, L., & Stevens, D. (2012). Can agent cheap talk mitigate agency problems in the presence of a noisy performance measure? an experimental test in a single- and multi-period setting. Journal of Management Accounting Research, 24(1), 135-158.
- Dunk, A. S. (1995). The joint effect of participative budgeting and managerial interest in innovation on departmental performance. Scandinavian Journal of Management, 11(1), 75–85. https://doi.org/10.1016/0956-5221(94)00030-L
- Fenigstein, A. (2015). Milgram’s shock experiments and the Nazi perpetrators: A contrarian perspective on the role of obedience pressures during the Holocaust. Theory & Psychology, 25(5), 581–598. https://doi.org/10.1177/0959354315601904
- Fisher, J. G., Frederickson, J. R., & Peffer, S. A. (2000). Budgeting: An Experimental the Effects of Negotiation. The Accounting Review, 75(1), 93–114. https://doi.org/10.2308/accr.2000.75.1.93
- Gago-Rodríguez, S., & Naranjo-Gil, D. (2016). Effects of trust and distrust on effort and budgetary slack: an experiment. Management Decision, 54(8), 1908–1928. https://doi.org/10.1108/MD-10-2015-0480
- Huang, C. L., & Chen, M. L. (2009). The effect of attitudes towards the budgetary process on attitudes towards budgetary slack and behaviors to create budgetary slack. Social Behavior and Personality, 37(5), 661–671. https://doi.org/10.2224/sbp.2009.37.5.661
- Kramer, S., & Hartmann, F. (2014). How top-down and bottom-up budgeting affect budget slack and performance through social and economic exchange. Abacus, 50(3), 314–340. https://doi.org/10.1111/abac.12032
- Kren, L., & Maiga, A. (2007). The intervening effect of information asymmetry on budget participation and segment slack. Advances in Management Accounting, 16.
- Lucyanda, J., & Sholihin, M. (2023). The effect of gender and code of ethics on budgetary slack ethical judgment: experimental evidence from Indonesia. Journal of Economics, Finance and Administrative Science. https://doi.org/10.1108/JEFAS-05-2021-0044
- Merchant, K. A. (1984). Influences on departmental budgeting: an empirical examination of a contingency model. Accounting, Organizations and Society, 9(3), 291–307.
- Milgram, S. (1974). Obedience to authority: An experimental view. New York, NY: Harper & Row.
- Mowchan, M., Lowe, D. J., & Reckers, P. M. J. (2015). Antecedents to unethical corporate conduct: Characteristics of the complicit follower. Behavioral Research in Accounting, 27(2), 95–126. https://doi.org/10.2308/bria-51186
- Nouri, H. (1992). The effects of budgetary participation on job performance: A conceptual model and its empirical test. Dissertation Temple University Graduate Board.
- Nouri, H., & Kyj, L. (2013). An experimental examination of the combined effects of normative and instrumental commitments on budgetary slack creation: Comparing individuals versus group members. Advances in Management Accounting, 22, 225–260. https://doi.org/10.1108/S1474-7871(2013)0000022014
- Prananjaya, K. P., & Narsa, N. P. D. R. H. (2019). Obedience pressure and tax sanction: An experimental study on tax compliance. Jurnal Akuntansi dan Keuangan, 21(2), 68–81. https://doi.org/10.9744/jak.21.2.68-81
- Schwering, A. (2017). The influence of peer honesty and anonymity on managerial reporting. Journal of Business Economics, 87(9), 1151–1172. https://doi.org/10.1007/s11573-017-0861-9
- Shields, M. D., & Shields, J. F. (1998). Antecendets of participative budgeting. Accounting, Organizations and Society Organizations Society, 23(1), 49–76.
- Stevens, D. E. (2002). The effects of reputation and ethics on budgetary slack. Journal of Management Accounting Research, 14(1), 153–171. https://doi.org/10.2308/jmar.2002.14.1.153
- Young, S. M. (1985). Participative budgeting: The effects of risk aversion and asymmetric information on budgetary slack. Journal of Accounting Research, 23(2), 829–842. https://doi.org/10.2307/2490840
- Yuen, D. (2007). Antecedents of budgetary participation: Enhancing employees’ job performance. Managerial Auditing Journal, 22(5), 533–548. https://doi.org/10.1108/02686900710750793
References
Ang, N., & Cheng, M. M. (2016). Does self-certification encourage or reduce opportunistic behavior? Behavioral Research in Accounting, 28(2), 1–16. https://doi.org/10.2308/bria-51468
Baird, J., & Zelin, R. (2000). The effects of information ordering on investor perceptions: An experiment utilizing presidents’ letters. Journal of Financial and Strategic Decisions, 13(3), 71–80.
Bicchieri, C. (2006). The grammar of society: The nature and dynamics of social norms. New York, NY: Cambridge University Press.
Bishop, C. C., Dezoort, F. T., & Hermanson, D. R. (2017). The effect of CEO social influence pressure and CFO accounting experience on CFO financial reporting decisions. Auditing, 36(1), 21–41. https://doi.org/10.2308/ajpt-51507
Brownell, P., & McInnes, M. (1986). Budgetary participation, motivation, and managerial performance. Accounting Review, 61(4), 587. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4479014&site=ehost-live
Cahyaningrum, C. D., & Utami, I. (2015). Do obedience pressure and task complexity affect audit decision? Jurnal Akuntansi dan Keuangan Indonesia, 11(1), 92–105. https://doi.org/10.21002/jaki.2015.06
Chong, V. K., & Khudzir, N. F. (2018). The effect of mutual monitoring and need for achievement on budgetary slack in a team-based environment. Advances in Accounting Behavioral Research, 21.
Davidson, B. I., & Stevens, D. E. (2013). Can a code of ethics improve manager behavior and investor confidence? An experimental study. Accounting Review, 88(1), 51–74. https://doi.org/10.2308/accr-50272
Davis, S., DeZoort, F. T., & Kopp, L. S. (2006). The effect of obedience pressure and perceived responsibility on management accountants’ creation of budgetary slack. Behavioral Research in Accounting, 18(1), 19–35. https://doi.org/10.2308/bria.2006.18.1.19
De Baerdemaeker, J., & Bruggeman, W. (2015). The impact of participation in strategic planning on managers’ creation of budgetary slack: The mediating role of autonomous motivation and affective organisational commitment. Management Accounting Research, 29, 1–12. https://doi.org/10.1016/j.mar.2015.06.002
DeZoort, F. T., & Lord, A. T. (1997). A review and synthesis of pressure effects research in accounting Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Journal of Accounting Literature, 16, 28–85.
Douthit, J. D., & Stevens, D. E. (2015). The robustness of honesty effects on budget proposals when the superior has rejection authority. Accounting Review, 90(2), 467–493. https://doi.org/10.2308/accr-50937
Douthit, J. D., Kearney, L., & Stevens, D. (2012). Can agent cheap talk mitigate agency problems in the presence of a noisy performance measure? an experimental test in a single- and multi-period setting. Journal of Management Accounting Research, 24(1), 135-158.
Dunk, A. S. (1995). The joint effect of participative budgeting and managerial interest in innovation on departmental performance. Scandinavian Journal of Management, 11(1), 75–85. https://doi.org/10.1016/0956-5221(94)00030-L
Fenigstein, A. (2015). Milgram’s shock experiments and the Nazi perpetrators: A contrarian perspective on the role of obedience pressures during the Holocaust. Theory & Psychology, 25(5), 581–598. https://doi.org/10.1177/0959354315601904
Fisher, J. G., Frederickson, J. R., & Peffer, S. A. (2000). Budgeting: An Experimental the Effects of Negotiation. The Accounting Review, 75(1), 93–114. https://doi.org/10.2308/accr.2000.75.1.93
Gago-Rodríguez, S., & Naranjo-Gil, D. (2016). Effects of trust and distrust on effort and budgetary slack: an experiment. Management Decision, 54(8), 1908–1928. https://doi.org/10.1108/MD-10-2015-0480
Huang, C. L., & Chen, M. L. (2009). The effect of attitudes towards the budgetary process on attitudes towards budgetary slack and behaviors to create budgetary slack. Social Behavior and Personality, 37(5), 661–671. https://doi.org/10.2224/sbp.2009.37.5.661
Kramer, S., & Hartmann, F. (2014). How top-down and bottom-up budgeting affect budget slack and performance through social and economic exchange. Abacus, 50(3), 314–340. https://doi.org/10.1111/abac.12032
Kren, L., & Maiga, A. (2007). The intervening effect of information asymmetry on budget participation and segment slack. Advances in Management Accounting, 16.
Lucyanda, J., & Sholihin, M. (2023). The effect of gender and code of ethics on budgetary slack ethical judgment: experimental evidence from Indonesia. Journal of Economics, Finance and Administrative Science. https://doi.org/10.1108/JEFAS-05-2021-0044
Merchant, K. A. (1984). Influences on departmental budgeting: an empirical examination of a contingency model. Accounting, Organizations and Society, 9(3), 291–307.
Milgram, S. (1974). Obedience to authority: An experimental view. New York, NY: Harper & Row.
Mowchan, M., Lowe, D. J., & Reckers, P. M. J. (2015). Antecedents to unethical corporate conduct: Characteristics of the complicit follower. Behavioral Research in Accounting, 27(2), 95–126. https://doi.org/10.2308/bria-51186
Nouri, H. (1992). The effects of budgetary participation on job performance: A conceptual model and its empirical test. Dissertation Temple University Graduate Board.
Nouri, H., & Kyj, L. (2013). An experimental examination of the combined effects of normative and instrumental commitments on budgetary slack creation: Comparing individuals versus group members. Advances in Management Accounting, 22, 225–260. https://doi.org/10.1108/S1474-7871(2013)0000022014
Prananjaya, K. P., & Narsa, N. P. D. R. H. (2019). Obedience pressure and tax sanction: An experimental study on tax compliance. Jurnal Akuntansi dan Keuangan, 21(2), 68–81. https://doi.org/10.9744/jak.21.2.68-81
Schwering, A. (2017). The influence of peer honesty and anonymity on managerial reporting. Journal of Business Economics, 87(9), 1151–1172. https://doi.org/10.1007/s11573-017-0861-9
Shields, M. D., & Shields, J. F. (1998). Antecendets of participative budgeting. Accounting, Organizations and Society Organizations Society, 23(1), 49–76.
Stevens, D. E. (2002). The effects of reputation and ethics on budgetary slack. Journal of Management Accounting Research, 14(1), 153–171. https://doi.org/10.2308/jmar.2002.14.1.153
Young, S. M. (1985). Participative budgeting: The effects of risk aversion and asymmetric information on budgetary slack. Journal of Accounting Research, 23(2), 829–842. https://doi.org/10.2307/2490840
Yuen, D. (2007). Antecedents of budgetary participation: Enhancing employees’ job performance. Managerial Auditing Journal, 22(5), 533–548. https://doi.org/10.1108/02686900710750793