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Budgetary slack under budget-based incentive schemes—the behavioral impact of social preferences, organizational justice, and moral disengagement

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  • Thomas Liessem
  • Ivo Schedlinsky
  • Anja Schwering
  • Friedrich Sommer

Abstract

This article examines factors influencing the creation of budgetary slack under budget-based incentive schemes. Classical agency theory serves as the starting point, with the dual role of budgeting as a planning and a motivational instrument. Under the assumption of fully rational utility maximizers, people should incorporate the maximum amount of budgetary slack possible given budget-related compensation. However, this behavior cannot be observed in reality or in experimental settings. Therefore, two important questions remain partially unanswered with regard to explaining the phenomenon of budgetary slack: First, why do individuals not maximize their own utility through budgetary slack? And, second, why is budgetary slack not eliminated completely due to reasons leading to the first question? Behavioral accounting research in this area has gained significant importance in the last years. In this domain, we focus on studies employing the psychological theories of social preferences, organizational justice, and moral disengagement and present primarily experimental as well as survey-based field research findings. The analysis leads to suggestions for further research in this area. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Thomas Liessem & Ivo Schedlinsky & Anja Schwering & Friedrich Sommer, 2015. "Budgetary slack under budget-based incentive schemes—the behavioral impact of social preferences, organizational justice, and moral disengagement," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(1), pages 81-94, April.
    • Handle: RePEc:spr:jmgtco:v:26:y:2015:i:1:p:81-94
    DOI: 10.1007/s00187-015-0206-1
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    More about this item

    Keywords

    Behavioral accounting; Budgeting; State of the art ; Incentive schemes; Budgetary slack; M41; M52;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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