Why Business Unit Controllers Create Budget Slack: Involvement in Management, Social Pressure, and Machiavellianism

Abstract

This paper investigates business unit (BU) controllers’ inclination to engage in the creation of budgetary slack. In particular, we explore whether controllers who are involved in BU decision making are more susceptible to social pressure to engage in slack creation than controllers who are not. We expect, and find, a crucial role of the controller’s personality. Results from an experiment among 136 management accountants suggest that the personality construct Machiavellianism interacts with involvement to explain controllers’ responses to social pressure to create budgetary slack. Controllers scoring high on Machiavellianism are more likely to give in to pressure by BU management to create budgetary slack when they have been involved in decision making. In contrast, controllers scoring low on Machiavellianism are less likely to give in to pressure to create slack when they have been involved in decision making.

Taxonomia do Dark Triad: Revelações da Rede Científica no Meio Organizacional

“…O tema Maquiavelismo foi relacionado com a capacidade de enganar e fraudar relatórios financeiros (Murphy, 2012), gerenciamento de resultados (Shafer & Wang, 2011), criação de folga orçamentária em decisões sob pressão (Hartmann & Maas, 2010) e a satisfação e sucesso do contabilista no ambiente laboral (Wakefield, 2008).…”

Do Shared Interests Affect the Accuracy of Budgets?

“…However, this study views the creation of budgetary slack through the theoretical lens of psychology and thus focuses on the behavior and judgment of the individuals involved in the budget process, considering factors such as ethics, honesty, the inducement of truth through budgetary participation and incentive plans, and the perception of what is acceptable or not by peers involved in the budget process (Chow et al, 1988;Evans III et al, 2001;Rankin, Schwartz, & Young, 2005;Maiga & Jacobs, 2008;Hartmann & Maas, 2010;Church et al, 2012). Chow et al (1988) studied the impact of reward schemes configurations (incentives) and information asymmetries on the creation of budgetary slack.…”

Accounting research: between natural science and practice

“…Under the explosive growth of cognitive and social neuroscience elsewhere, some early adopter papers have investigated neural, biological, drivers of accountant's agency (Eskenazi, Rietdijk, & Hartmann, 2016). ese authors build on Hartmann and Maas (2010), predicting that the e ect of social pressure may be explained by the accountant's biological make-up. Mirror neuron system functionality is used to explain the accountants' vulnerability.…”

“…Nevertheless, the discussion is not just about the di erence between hermeneutics and positivism. It is, quite simply, just one thing to conclude that accountants may su er from social bias in decision making settings [Hartmann and Maas (2010) investigated under what conditions business unit (BU) controllers engaged in the creation of budgetary slack under social pressure. ey found evidence of interactive e ects of personality (Machiavellianism) involvement in decision making] and quite another thing to provide advice to accountants about how to solve, evade or avoid settings in which this might happen.…”