Budgetary Slack

Budgetary Slack

The deliberate overestimation of expenses or underestimation of revenue for a project. Budgetary slack may be built into a project so that if expenses are less and/or revenues are more than expected, the project and its managers are viewed favorably by investors and/or executives.
References in periodicals archive ?
Six articles in this volume cover the effect of mutual monitoring and need for achievement on budgetary slack in a team-based environment; an empirical assessment of employee versus independent contractor status in taxation and the effect of judges' gender, political affiliation and industry on those decisions; whether non-professional investors' attitudes toward earnings management are consistent with their investing behavior; whether consulting services performed by internal auditors influence their subsequent assessments when performing assurance services; strategy evaluation when using a strategic performance measurement system: an examination of motivational and cognitive biases; and stories versus statistics: the impact of anecdotal data on managerial decision making.
The Effects Of Pay Schemes And Ratchets On Budgetary Slack And Performance: A Multiperiod Experiment.
1998, Antecedents of Budgetary Slack: A Literature Review and Synthesis, Journal of Accounting Literature, Vol.
So generalisation will be conditional and depend on the type of consultation, the type of employee and the work involved, the significance of budgetary slack and the nature of the reward system--among many other factors.
Managing budget emphasis through the explicit design of conditional budgetary slack. Accounting, Organizations and Society, 30 (7/8), 587-608.
Therefore, the proponents of this view suggest that cost allocations may be used to influence the behaviour of managers to take action in the best interests of the company as a whole (i.e., reduce divisional managers' expenditure on perquisites, reduce budgetary slack and encourage optimal' utilization of resources); (12 to 14); Each of the arguments in favor of cost allocation is examined in detail:
Studies involving budgetary slack (MERCHANT 1985; GOVINDARAJAN, 1986; CHOW et al., 1988; DUNK; PERERA, 1997, and FISHER et al., 2000) found that individuals reduce informational asymmetry when they are participating in the budget process, given that the budgets would be resulting from such participation, according to Junqueira, Oyadomari and Moraes (2007).
In this same vein, some suggest that concern for maintaining a favorable reputation leads to lower budgetary slack creation.
Budgetary slack is generally conceived as directly conflicting with the economic interests of a firm since it leads to less effort and results in inefficient distribution and utilization of the firm's resources (Van der Stede, 2000; Webb, 2002; Yuen, 2004).
"Antecedents of Budgetary Slack: A Literature Review and Synthesis." Journal of Accounting Literature 17: 72-96.