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The Effect of Accountability Pressure and Perceived Levels of Honesty on Budgetary Slack Creation

Vincent K. Chong

Michele K. C. Leong

David R. Woodliff

Advances in Accounting Behavioral Research

ISBN: 978-1-80071-013-9, eISBN: 978-1-80071-012-2

Publication date: 20 January 2021

Abstract

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.

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Acknowledgements

Acknowledgments

We would like to thank Roger Burritt, Freddie Choo, Linda Chang, Robert Chenhall, Mandy Cheng, Matthew Hall, Graeme Harrison, Johnny Jermias, Ralph Kober, Chong Man Lau, Reza Monem, Lokman Mia, Terence Ng, John Sands, David Smith, Jenny Stewart, Dennis Taylor, Ken Trotman, Hun Tong Tan, Alexandra Van den Abbeele, two anonymous reviewers as well as workshops participants at Griffith University, La Trobe University, Macquarie University, Monash University, Nanyang Technological University, University of New South Wales, University of South Australia, University of Western Australia, University of Technology, Sydney, and the 2010 AFAANZ Conference, 2011 EAA Annual Congress for their comments and suggestions on the earlier drafts of this paper. We would like to also thank Imran Syarifuddin and Siew Hong Wade for their assistance in data collection. This project was funded by a research grant from the UWA Business School Research Grants Scheme at the University of Western Australia.

Citation

Chong, V.K., Leong, M.K.C. and Woodliff, D.R. (2021), "The Effect of Accountability Pressure and Perceived Levels of Honesty on Budgetary Slack Creation", Karim, K.E., Fogarty, T., Rutledge, R., Pinsker, R., Hasseldine, J., Bailey, C. and Pitre, T. (Ed.) Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 24), Emerald Publishing Limited, Leeds, pp. 1-28. https://doi.org/10.1108/S1475-148820200000024001

Publisher

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Emerald Publishing Limited