The effect of trust-in-superior and truthfulness on budgetary slack: An experimental investigation

Abstract

This chapter examines the effect an informal control namely trust-in-superior and subordinates’ truthfulness in revealing their private information on budgetary slack. A laboratory experiment was conducted. A one-way analysis of variance (ANOVA) and ordinary least squares (OLS) regression were used to test the hypotheses proposed in this chapter. The independent variables were trust-in-superior and subordinates’ truthfulness in revealing their private information. The dependent variable was budgetary slack. The results indicate that trust-in-superior reduces the budgetary slack created by subordinates under private information condition. In addition, the results show that subordinates’ truthfulness in revealing their private information mediates the effect of trust-in-superior on budgetary slack.

Citation

Chong, V.K. and Ferdiansah, I. (2011), "The effect of trust-in-superior and truthfulness on budgetary slack: An experimental investigation", Epstein, M.J. and Lee, J.Y. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 19), Emerald Group Publishing Limited, Leeds, pp. 55-73. https://doi.org/10.1108/S1474-7871(2011)0000019009