Sabotage in Capital Budgeting: The Effects of Control and Honesty on Investment Decisions

Brunner, Markus; Ostermaier, Andreas

doi:10.1080/09638180.2017.1412338

Cited by 16 publications

(15 citation statements)

References 51 publications

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“…Another informal control used in this study and allegedly able to monitor the process of budgeting is honesty (Chong & Ferdiansah, 2011;Douthit & Stevens, 2015;Brunner & Ostermaier, 2017;Rahmawati, 2019). Honesty refers to individual attitudes and behaviors that reflect positive values and is a form of social norms that can influence individual behavior.…”

Section: H1: the Perception Reputation Of Superiors Weakens The Relat...mentioning

confidence: 99%

“…Several researchers who tested the relationship between honesty and budgetary slack showed negative results, such as Chong & Ferdiansah (2011); Douthit & Stevens (2015); Brunner & Ostermaier (2017); Rahmawati (2019). This shows that when subordinates have a high level of honesty, the tendency to create budgetary slack will be lower.…”

Section: H1: the Perception Reputation Of Superiors Weakens The Relat...mentioning

confidence: 99%

“…However, the implementation of a formal control system can cause negative effects such as dissatisfaction among subordinates and tends to require higher costs (Chong & Loy, 2015). In addition, a formal control system that is clearly implemented indicates that there is distrust is formed so that it will override positive reciprocal preferences (Brunner & Ostermaier, 2017). Therefore, the use of informal controls can be increased to assist in overseeing the operational activities of the company or organization.…”

Section: Introductionmentioning

confidence: 99%

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Perceptions of superiors’ reputations and subordinates’ honesty moderates effect of budget participation on budgetary slack

Ginanti

Widanaputra

2022

ijbem

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This study aims to provide empirical evidence regarding perceptions of superior reputation and subordinate honesty in weakening the effect of budgetary participation on budgetary slack. The data in this study were collected using a questionnaire. The population in this study is the Satuan Kerja Perangkat Daerah of Tabanan Regency with a sample of Echelon III and Echelon IV officials involved in budgeting. The sampling technique used is purposive sampling and obtained a sample of 199 respondents. The analysis technique in this study is Moderated Regression Analysis (MRA) using SPSS version 25 program. The results of the regression analysis state that the perception of superior reputation weakens the relationship between budgetary participation and budgetary slack. This means that the higher the level of perception of subordinates on the reputation of their superiors, the tendency for budgetary slack to occur will be lower. The results of the regression analysis also state that the honesty of subordinates weakens the relationship between budgetary participation and budgetary slack. This means that the higher the level of honesty of subordinates, the tendency for budgetary slack to occur will be lower.

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Section: H1: the Perception Reputation Of Superiors Weakens The Relat...mentioning

confidence: 99%

Section: H1: the Perception Reputation Of Superiors Weakens The Relat...mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Perceptions of superiors’ reputations and subordinates’ honesty moderates effect of budget participation on budgetary slack

Ginanti

Widanaputra

2022

ijbem

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“…As such, the difference in slack between conditions captures the effect of preferences for honesty incremental to other factors that affect slack. Using this cleaner measure of preferences for honesty, research finds that preferences for honesty are a significant driver of reporting behavior both when the subordinate has wide discretion over the budget (Rankin et al 2008;Haesebrouck 2018) and when budgets can be rejected (Douthit and Stevens 2015;Brunner and Ostermaier 2018).…”

Section: Participative Budgeting and Preferences For Honestymentioning

confidence: 99%

“…In the Factual Assertion treatment, preferences for honesty, altruism, and fairness all affect slack, while only preferences for altruism and fairness affect slack with No Factual Assertion. Thus, the differences in slack between treatments captures relative preferences for honesty(Rankin et al 2008;Douthit and Stevens 2015;Brunner and Ostermaier 2018;…”

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confidence: 99%

Why don't people lie? Negative affect intensity and preferences for honesty in budgetary reporting

Blay

Douthit

Fulmer

2019

Management Accounting Research

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Budgets are instrumental in management control systems but are prone to gaming behavior that creates slack and limits the effectiveness of budgets. Research suggests, however, that subordinates have preferences for adhering to a social norm of honesty that limits slack in their budgetary reporting. As such, an increased understanding of subordinates' preferences for honesty can improve participative budgeting systems. We develop and test theory that increases our understanding of the drivers of preferences for honesty. We test the theory that preferences for honesty originate from an individual's desire to avoid negative affect from violating social norms. Further, individuals systematically differ in the intensity with which they experience their negative affective reactions. Those with higher levels of this intensity (negative affect intensity, NAI), experience more negative affect and disutility from violating a norm of honesty. Thus, NAI is predictive of subordinates' preference for honesty. Experimental results support our theory. Budgetary slack is constrained by preferences for honesty and NAI increases preferences for honesty. As such, preferences for honesty are a stronger informal control for subordinates with higher NAI. We discuss the implications of our theory for contract design and job assignment.

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Whither the hidden returns to control: A short research paper

et al. 2022

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The term “hidden returns to control” (HRTC) refers to a phenomenon in which agents display more prosocial behavior when principals refrain from using available controls than when controls are unavailable. However, while HRTC has been observed in some experiments, it has not been reliably replicated. Two experiments are designed to test the existence of HRTC. The experiments use simplified designs and within‐participant measurements to reduce noise. The first experiment is a trust game; the second is a gift‐exchange game. We find clear evidence of HRTC in both experiments and validate with a post‐experiment questionnaire.

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Sabotage in Capital Budgeting: The Effects of Control and Honesty on Investment Decisions

Cited by 16 publications

References 51 publications

Perceptions of superiors’ reputations and subordinates’ honesty moderates effect of budget participation on budgetary slack

Perceptions of superiors’ reputations and subordinates’ honesty moderates effect of budget participation on budgetary slack

Why don't people lie? Negative affect intensity and preferences for honesty in budgetary reporting

Whither the hidden returns to control: A short research paper

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