The effects of measurement basis and slack benefits on honesty in budget reporting

Bryan K. Church, Kuang, Xi (Jason) and Liu, Yuebing (Sarah)

Accounting, Organizations and Society, 2019, vol. 72, issue C, 74-84

Abstract: In this study, we experimentally investigate how managers' budget reporting behavior is influenced by two important features of the budgeting system: the measurement basis used in budget preparation (i.e., whether managers make budget reports in financial or nonfinancial measures) and managers' slack benefits in budget execution (i.e., whether managers benefit from budgetary slack directly or through an intermediate activity). While prior research suggests that moral self-regulation helps promote honest behavior, we predict that a financial measurement basis undermines moral self-regulation by strengthening the manager's desire to advance self-interest and that the absence of direct slack benefits undermines moral self-regulation by making misreporting more justifiable. We also predict that the effects of these two budgetary features on honesty are non-additive, due to the manager's diminishing marginal net utility from misreporting. Experimental results are consistent with our predictions. The implications of our findings for management accounting theory and practice are discussed.

Keywords: Managerial reporting; Honesty; Budgetary slack; Financial measures; Nonfinancial measures (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0361368218302460
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:aosoci:v:72:y:2019:i:c:p:74-84

DOI: 10.1016/j.aos.2018.05.005

Access Statistics for this article

Accounting, Organizations and Society is currently edited by Christopher Chapman

More articles in Accounting, Organizations and Society from Elsevier
Bibliographic data for series maintained by Catherine Liu ().