Honesty in Managerial Reporting

Evans, John H.; Hannan, R. Lynn; Krishnan, R. S.; Moser, Donald V.

doi:10.2139/ssrn.269448

Cited by 136 publications

(276 citation statements)

References 31 publications

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“…From this perspective, budgetary slack is a type of opportunistic behavior that reduces the value of participative budgeting to the firm (Baiman and Evans 1983;Merchant 1985;Kren and Liao 1988). 1 Contrary to the assumptions of traditional agency theory, prior experimental studies of participative budgeting find that subordinates exhibit honesty concerns in their budget proposals (Young 1985;Chow, Cooper, and Waller 1988;Evans et al 2001;Stevens 2002;Hannan, Rankin, and Towry 2006;Zhang 2008).…”

Section: Introductionmentioning

confidence: 96%

“…2 These studies also find that such honesty concerns can lead to increased efficiency for the firm in participative budgeting settings (Evans et al 2001).…”

Section: Introductionmentioning

confidence: 97%

“…Shields and M. Shields 1998;Libby and Lindsay 2007). To the extent that subordinates truthfully communicate their private information in the budget, participative budgeting yields useful information for central management to use in production, marketing, and capital budgeting decisions (Evans, Hannan, Krishnan, and Moser 2001). Traditional agency theory, however, assumes that subordinates suffer no disutility for misrepresenting their private information and will build slack into their budget to maximize their wealth, absent a contractual incentive to do otherwise (Baiman 1990).…”

Section: Introductionmentioning

confidence: 99%

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The Robustness of Honesty Effects on Budget Proposals when the Superior has Rejection Authority

Douthit

Stevens

2014

The Accounting Review

106

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Rankin, Schwartz, and Young (2008) find experimental evidence that manipulating whether the budget request of the subordinate requires a factual assertion has no effect on budgetary slack when the superior can reject the budget. This calls into question the role of honesty in participative budgeting settings. Using Rankin et al. 's (2008) manipulation to capture honesty effects, we examine the robustness of honesty effects on budget proposals when the superior has rejection authority in two experiments. In Experiment 1, we document that honesty has a strong effect on budgetary slack when the salience of distributional fairness is reduced by withholding the relative pay of the superior from the subordinate. In Experiment 2, we document that honesty continues to have a strong effect on budgetary slack when the salience of reciprocity is increased by giving the superior the ability to set the subordinate's salary. Thus, our evidence suggests that honesty effects on budget proposals are generally robust to giving the superior rejection authority. Our study helps explain prior experimental results and clarifies the role of honesty in participative budgeting settings.

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Section: Introductionmentioning

confidence: 96%

“…2 These studies also find that such honesty concerns can lead to increased efficiency for the firm in participative budgeting settings (Evans et al 2001).…”

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

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The Robustness of Honesty Effects on Budget Proposals when the Superior has Rejection Authority

Douthit

Stevens

2014

The Accounting Review

106

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“…Second, individuals' valuation of non-monetary (social) payoffs influences MA, and individuals' valuation of these non-monetary payoffs can in turn be influenced by MA. For example, the most effective MA control system for an organization in which some individuals value honest communication or social identity will be different from the most effective system for an organization in which no individuals have such preferences (Evans et al, 2001;Towry, 2003). Conversely, characteristics of an MA control system such as budgeting procedures and compensation can influence the extent to which individuals put high values on honesty and/or fairness (Rankin et al, 2008;Zhang, 2008).…”

Section: Limited Heterogeneity Of Subjective Decision Modelsmentioning

confidence: 99%

Psychology Models of Management Accounting

Luft

2010

FNT in Accounting

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“…branch and central management) [3], [4]. Asymmetry information arises when subordinates have relevant information toward the decision making process of budgeting while the superior does not have enough relevant information [5]. Asymmetry information occurs when one party has an adequate knowledge of the information about the company, while others are not.…”

Section: Introductionmentioning

confidence: 99%

Cognitive Effects in the Relationship between Budgetary Participation and Job Performance: A Case Study of Manufacturing Industry in Banten, Indonesia

Hanifah¹

2013

IJSSH

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Abstract-The study focused on budgetary participation in manufacturing companies in Banten Province, Indonesia. The purpose of the study is to find empirical evidence on the cognitive effects of information acquired by local managers related to budgetary participation and job performance. The method of the study is survey method. The sample of the study consisted of 178 middle-level managers of large-scale manufacturing in Banten. The result of the study showed that asymmetry information affects budgetary participation and budgetary participation influence on performance through job relevant information. These findings give some inputs to the company's management when the local information from subordinate is more complete than the superior information. Therefore, the company should open enough space to involve subordinates in the budgeting process. By providing the opportunity to participate in the preparation of the budget, local information obtained will be taken into consideration in deciding the budget. IndexTerms-Asymmetry information, budgetary participation, job relevant information, job performance.

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Honesty in Managerial Reporting

Cited by 136 publications

References 31 publications

The Robustness of Honesty Effects on Budget Proposals when the Superior has Rejection Authority

The Robustness of Honesty Effects on Budget Proposals when the Superior has Rejection Authority

Psychology Models of Management Accounting

Cognitive Effects in the Relationship between Budgetary Participation and Job Performance: A Case Study of Manufacturing Industry in Banten, Indonesia

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