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Budget Participation And Budgetary Slack: Evidence From Quoted Firms In Nigeria

Author

Listed:
  • Okafor, Chinwuba

    (University of Benin)

  • Otalor, John

    (University of Calabar)

Abstract

The study examines the effect of allowing subordinate managers and employees to take part in budgeting on budgetary slack creation in Nigeria. Survey research design was adopted for the study. The data used in the study were obtained from questionnaire administered on 800 employees of the 129 firms quoted on the Nigerian Stock Exchange as at September, 2017. Out of the 338 forms retrieved, only 269 (79.58%) were usable. Amodel was specified and descriptive statistics, correlation analysis, Lagrangian ratio (LR) statistic, factor analysis and ordered logit and probit regression analysis, were carried out. To ensure reliability and validity of the results, diagnostic tests such as normality, multicollinearity and heteroscedasticity were carried out as well. The study reveals that coefficient of budget participation is positive and statistically significant at both 95% and 99% confidence intervals. Thus, among employees of Nigerian firms, budget participation leads to creation of budgetary slack. The paper recommends that management of quoted Nigerian firms should closely monitor employees especially during the budget preparation process to obviate information asymmetry there by reducing the prospect of budgetary slack creation.

Suggested Citation

  • Okafor, Chinwuba & Otalor, John, 2018. "Budget Participation And Budgetary Slack: Evidence From Quoted Firms In Nigeria," International Journal of Contemporary Accounting Issues-IJCAI (formerly International Journal of Accounting & Finance IJAF), The Institute of Chartered Accountants of Nigeria (ICAN), vol. 7(2), pages 106-118, December.
    • Handle: RePEc:ris:ijafic:0007
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    References listed on IDEAS

    as
    1. Merchant, Kenneth A., 1985. "Budgeting and the propensity to create budgetary slack," Accounting, Organizations and Society, Elsevier, vol. 10(2), pages 201-210, April.
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    3. Kilfoyle, Eksa & Richardson, Alan J., 2011. "Agency and structure in budgeting: Thesis, antithesis and synthesis," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 22(2), pages 183-199.
    4. Mark T. Bradshaw & Scott A. Richardson & Richard G. Sloan, 2001. "Do Analysts and Auditors Use Information in Accruals?," Journal of Accounting Research, Wiley Blackwell, vol. 39(1), pages 45-74, June.
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