The impact of reputation and variance investigations on the creation of budget slack

Experimental research and survey studies have yielded conflicting findings about the conditions under which budget slack is likely to arise. This study begins to reconcile the contradictory evidence by examining the impact of two features of the organizational context in which budget decisions are made: reputation concerns and variance investigations. The results of a laboratory experiment show concern for maintaining a favourable reputation leads to lower budget slack as does the existence of a variance investigation policy. The findings extend the agency theory framework by incorporating both pecuniary and non-pecuniary features that influence behavior when budgets have consequences beyond the immediate period. The results also suggest reputation concerns and control system features may serve as cost-effective substitutes for exhaustive incentive contracting in practical settings.     

A note on work-related values, budget emphasis and managers’ organisational commitment

Managers’ work-related values (WRVs) have important implications for designing appropriate management accounting systems (MAS) in organisations. This paper examines the effect of the interaction between managers’ WRV for innovation and budget emphasis (an integral part of MAS) on their organisational commitment. The sample consisted of 109 managers from production, marketing and support departments within Australian manufacturing firms. Hypotheses were tested using both quantitative and qualitative data collected by a questionnaire survey and post-survey interviews. The results indicate that the adoption of low budget emphasis led to high organisational commitment when managers’ WRV for innovation was high, but not when managers’ WRV for innovation was low. The results also indicate that marketing managers held higher WRV for innovation than production managers. The post-survey interviews provide further insight into how a more customer- and competitor-focused subculture of marketing managers and a more technical- and efficiency-focused subculture of production managers may promote the difference in their WRV for innovation, and affect their attitudes towards budget emphasis. The findings of the study have implications for design of performance evaluation systems for managers in functionally differentiated organisations.     

Two sides of the same coin: The simultaneous effects of spending and saving needs on budget estimation

This research explores how consumers plan for their personal finances, focusing on the simultaneous effects of spending and saving needs in budget-setting. The current research proposes that the number of budget categories and salient savings goals interactively influence consumers’ budget estimation. In two lab studies, we showed that participants with a salient savings goal tend to experience conflicts when they have the same (vs. different) number of budget categories for spending and saving needs, thereby perceiving the increased savings goal importance, which leads to the increased money allocation to saving. Our results further suggest that a detailed financial plan may not always help consumers to pursue financial success. This research contributes to the body of work on budgeting and consumer finance. We conclude by discussing the theoretical and practical implications of our findings.

     

高等学校零基预算编制问题研究

零基预算近年来在我国得以推广,并取得一定成效。但是,由于预算环境和预算过程中各种不完善因素的存在,零基预算在我国高校财务预算编制中没有发挥根本性的作用。不少高校的财务预算编制采用的是一种形式上的零基预算加部门预算的预算编制模式。零基预算在我国高校的推行既需要政府的政策配套、协调合作,更需要高校改革现有的预算编制模式和预算管理模式,从而形成内外互动的良好的高校零基预算管理体系。     

A study of the linkages between rolling budget forms,uncertainty and strategy

Addressing the dearth of studies on rolling budgets, we investigate how the importance of rolling budgets for various planning, control and evaluation reasons relate to a business unit's strategy and uncertainty, and report on the variation in these responses when partitioned into quarterly and monthly rolling budget types. We use a survey instrument with responses from 182 rolling budget firms in our investigation. Our findings reveal consistencies as well as deviations between our sub-samples (quarterly and monthly rolling budgets), and the total rolling budget sample. We report that the way rolling budgets relate to uncertainty and strategy in organisations are substantively different for monthly and quarterly rolling budget types, and vary across planning, control and evaluation budget reasons. Our findings show a greater sensitivity between monthly rolling budgets and uncertainty/strategy, and virtually nil relations between quarterly rolling budgets and uncertainty/strategy. We posit that monthly rolling budgets are used in a manner more traditionally associated to rolling budgets in prior studies, while quarterly rolling budgets might be used relatively more symbolically or in response to external pressures such as earnings forecast requirements, and are less sensitive to established organisational antecedents such as uncertainty/strategy.     

Vertical,horizontal, and self control in academia: Survey evidence on their diverging effects on perceived researcher autonomy and identity

Foucault-oriented research has since long argued that the proliferation of performance measurement systems (PMSs) within academia threatens perceived researcher autonomy and identity through normalization and stigmatization of deviants. The theoretical model developed in this study nuances these claims by suggesting that effects of PMSs will differ depending on whether they are enacted as important for superiors (vertical control), colleagues (horizontal control), the researchers themselves (self control), and how they are constructed by these very systems. Overall, the structural equation modelling analyses conducted on questionnaire data from some 700 Swedish researchers strongly confirm the model developed. Specifically, they show that PMSs enacted as a vertical form of control indeed threatens perceived autonomy and identity, and that horizontal control in the form of publish and peer pressure among colleagues works as a mediating mechanism which strengthens these effects. However, our analyses also show that when PMSs are enacted as important means of self control, this in fact increases perceptions of autonomy and reduces feelings of identity threat. We also find that the extent to which these systems construct researchers as high-performing is an important antecedent explaining how come they can be enacted in so different ways, and the effects thereof.     

Productivity shocks, budget deficits and the current account

Productivity shocks and budget deficits are considered to be two key determinants of the current account. In order to assess formally the role of both factors in driving current account movements, the present paper extends the standard intertemporal model of the current account to allow for Non-Ricardian household behavior. Testable cross-equation restrictions for the current account and investment are derived by drawing on the distinction between country-specific and global innovations to productivity as well as to the government budget. We test the restrictions of the model against time series data for 21 OECD countries and find evidence in support of the model.     

The differential effect of environmental dimensionality,size, and structure on budget system characteristics in hotels

Whilst the service sector is a major component of world economies, research into, and thus our understanding of, how management control systems function in the service environment is limited. To advance our knowledge and understanding of the role of budgets in service organizations, this organizational level study extends prior manufacturing context research investigating the influence of contextual variables on budget system characteristics (BSC) to hotels. Since the nature of service firm operations is highly dependent on the external environment, perceived environmental uncertainty (PEU) is likely to be a key contextual variable. Consistent with the organizational theory literature, this study conceptualizes PEU more correctly as a multi-dimensional construct and seeks to ascertain the influence of components of PEU on the BSC of hotels, the chosen service industry. Based on a sample of 106 hotels and using path analyses, the results indicated that: (1) different dimensions of PEU have differential effects on BSC and organizational structure, (2) hotel size has a significant effect on BSC, (3) hotel size does not significantly influence structure, and (4) hotel organizational structure has significant influences on BSC. The finding for PEU raises implications for future researchers studying PEU.     

Political budget cycles in new versus established democracies

Like other recent studies, we find a political deficit cycle in a large cross-section of countries, but show that this result is driven by the experience of “new democracies”. The political budget cycle in new democracies accounts for the finding of a budget cycle in larger samples that include these countries and disappears when they are removed from the larger sample. The political deficit cycle in new democracies accounts for findings in both developed and less developed economies, for the stronger cycle in weaker democracies, and for differences in the political cycle across governmental and electoral systems. Our findings may reconcile two contradictory views of pre-electoral manipulation, one that it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other that voters punish rather than reward fiscal manipulation.     

金融发展、预算软约束与企业投资

本文利用上市公司的数据,实证检验了在我国转型经济的特殊制度背景下,金融发展促进经济增长的微观传导机制是否存在并发挥作用以及影响这种作用发挥的制度性因素。研究结果发现金融发展水平的提高能够减轻企业的融资约束,降低企业投资对内部现金流的依赖性。但是,预算软约束的存在扭曲了国有企业面临的真实的融资约束,使得其投资对内部现金流的依赖程度要明显低于民营企业,并且这种软约束的存在还减弱了金融发展对国有企业所带来的积极作用,产生了“漏出”效应。本文的启示为:在我国转型经济的特殊制度背景下,如果要真正地减轻企业的融资约束,降低市场交易的成本,促进经济的发展,必须从提高金融发展水平和硬化预算约束同时入手。     

Vertical information sharing in the budgeting process

This study develops a model of vertical information sharing between superior and subordinate in the budgeting process. Upward information sharing involves the revelation of private information by subordinate to superior. Its proposed antecedents are budget participation and organizational commitment while job performance is a proposed outcome. Downward information exchanges from superior to subordinate are also examined by including role ambiguity in the model. Survey results suggest that vertical information sharing is an important intervening variable in understanding the performance effects of budget participation and organizational commitment.     

Effect of perceived risk on nuclear power plant operators’ safety behavior and errors

Safety behavior and human errors are major concerns for nuclear power plant operators. The present study investigated how nuclear power plant operators’ perceived risk influences the quality of their own work performance in terms of safety behavior and errors. In total, 349 operators from two nuclear power plants in China participated in the present study. We found that perceived risk had a negative linear relationship with safety behavior and a quadratic relationship with errors. Leader support played a moderating role in the relationships between perceived risk, safety behavior, and errors. These results supported the job demands–resources model and provided further evidence for the relationship between perceived risk and outcomes related to safety behavior and errors. Our findings suggest that an effective way to address the issue of high perceived risk is to provide a supportive environment.     

Unraveling the political budget cycle nexus in Greece

This paper studies whether the Greek budget deficit is systematically affected by changes of government in the context of two political parties alternating in office. We advance the existing literature by constructing a tax evasion variable specific to the Greek economy and incorporating into our models. Testing the impact of each party upon the budget deficit during election and non-election years in the presence of tax evasion, we find a strong and persistent relationship between them independently of party political ideology. We assert that our finding constitutes a stylized fact of the Greek drama. Our results suggest that tax evasion together with the incident of two political parties alternating in office have tended to exacerbate the Greek government budget deficit accounting for about half the variation in it over the period examined. Moreover, GDP growth is found to exert a mitigating and permanent effect on budget deficit fluctuation.     

THE EFFECT OF EMPHASIS ON TIGHT BUDGET TARGETS AND COST CONTROL ON PRODUCTION AND MARKETING MANAGERS'' PROPENSITY TO CREATE SLACK

Extant literature suggests that target setting must be complemented by cost control. There are, however, strong theoretical reasons to suggest that cost control, whilst meaningful for the manufacturing function, may be less effective for the marketing function. Difficulties in setting standards and tracing marketing results (sales) to marketing effort and the discretionary nature of many marketing costs are likely to reduce the effectiveness of cost control in marketing departments. This study examines firstly, whether cost control moderates the relationships between emphasis on tight budget targets and subordinates' propensity to create slack; and secondly, whether these relationships are found in both the manufacturing and the marketing functions. The results support a significant two-way interaction between emphasis on tight budget targets and cost control affecting propensity to create slack for the manufacturing function, but not for the marketing function. Marketing managers' propensity to create slack was found to be associated only with emphasis on tight budget targets. These results are consistent with the theory that differences in manufacturing and marketing can influence the effectiveness of accounting control systems.     

Industry structure and horizontal takeovers: Analysis of wealth effects on rivals,suppliers, and corporate customers

We examine the wealth effects of horizontal takeovers on rivals of the merging firms, and on firms in the takeover industry's supplier and customer industries. Inconsistent with the collusion and buyer power motives, we find significant positive abnormal returns to rivals, suppliers, and corporate customers for the subsample of takeovers with positive combined wealth effect to target and bidder shareholders. Overall, our findings suggest that the average takeover in our sample is driven by efficiency considerations. However, we find evidence suggesting that horizontal takeovers increase the buyer power of the merging firms if suppliers are concentrated.     

Fiscal rules, budget deficits and budget projections

Fiscal rules are mentioned as instruments to commit political actors on long-term fiscal sustainability. However, fiscal rules may have stronger effects on projected than on realized fiscal outcomes because of window-dressing measures or because they alter the bargaining situation in the budget process. In our analysis for Swiss cantons, fiscal rules significantly lower the probability of projected and realized deficits with the former effect being twice as large. Projections are generally over-pessimistic but fiscal rules increase the probability of accurate projections. Thus, fiscal rules seem to substitute for finance ministers’ over-pessimistic projections intended to reign in fellow ministers and legislatures (100 words).     

Analyzing state government spending: balanced budget rules or forward-looking decisions?

We analyze US state government spending behavior with a general intertemporal model allowing for asymmetry in balanced budget rules in a panel data setting. We find no strong evidence for forward-looking behavior in state spending; balanced budget rules are a significant constraint. States with budget rules imposing lighter restrictions are more likely to exhibit habit formation, while those with stricter rules demonstrate asymmetric responses to revenue changes. Evidence for a precautionary savings motive is limited. Balanced budget requirements trigger substantial pro-cyclical spending, possibly amplifying state economic volatility for states with tight fiscal rules, especially after revenue increases.

     

External and budget deficits in some developing countries

This paper documents and explains the positive comovement between the external and budget deficits of developing countries for which post-1960 time-series data are available. First, the estimates indicate that the empirical covariance between these deficits is always positive and is statistically significant for many cases. Second, the empirical covariance is close to that predicted from a tractable small open-economy, overlapping-generation model with heterogeneous goods capturing the joint behavior of the external and budget deficits. Also, the predicted covariance is induced by shocks which are closely related to internal conditions such as domestic resources and fiscal policies, and to a much lesser extent to external conditions such as the world interest rate, real exchange rate, and terms of trade.     

政府部门预算支出绩效管理改革框架分析

政府部门预算支出绩效管理改革框架分析是以公共部门理性人和制度契约假设为理论研究前提,突出组织实施系统构建、部门预算分析员设置、绩效信息审计约束等制度体系创新,同时配合以必要的技术手段,使政府部门能够在科学的制度保障下,在产出、效率、结果和生产率四种不同层次绩效评定间进行理性选择,并最终为建立适应市场经济需要,以提高支出绩效水平为根本目标的现代政府部门预算支出管理模式奠定基础。     

Cost uncertainty and budget overspending: A safety-first perspective

In this study we model a cost center manager's decision about how to achieve a required level of output. The spending plan that the manager adopts is expected to result in successful performance, but at an uncertain cost. The uncertainty associated with the spending plan is inversely related to the expected cost. The analysis presented in this article suggests that a manager who exhibits Safety-First behavior and wishes to avoid large budget deviations is more likely to exceed what he or she perceives to be the overspending limit rather than the underspending limit. That manager will tend to incur costs in excess of the budget. This mathematical result has an intuitive appeal; a manager is willing to pay a certain “risk premium” to avoid the risk of large budget deviations and accompanying adverse consequences. This result has implications for both performance evaluation and budget setting, particularly in the public sector. Under the circumstances that we describe, using budgets in evaluating managerial performance may be misleading. Another application of our study relates to the “budget creep” phenomenon and how, under particular circumstances, its size can be reduced.