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Accounting, Companies and Contemporary society 25 (2000) 609±622
The relationship among two implications of financial
controls: budgetary slack creation and bureaucratic
Wim A. Van welcher Stede*
University of Southern California, Leventhal School of Accounting, Los Angeles, LOS ANGELES 90089-0441, UNITED STATES
Past studies possess provided contrary evidence according to eect of rigid budgetary controls upon slack and other dysfunctional behaviors. One inspiration for the existing study was to test if spillover eects exist among two supposed dysfunctional consequences of a strict budgetary control style: finances slack creation and managerial short-term positioning. The data support this legislation: reducing 1 form of dysfunctional behavior (slack creation) through rigid regulates seems to leak over in to another contact form (stronger supervision focus on business matters that aect initial results). Yet , the financial control models that businesses implement, plus the behaviors that they can encourage, can be aected by two important antecedents: organization unit earlier performance and competitive technique. The effects indicate that business units that either follow a dierentiation strategy and have been more pro®table will be subject to much less rigid financial controls, which will augment the actual capability to build slack as well as the propensity for managers to think long-term. These human relationships are tested in a structural equation unit on study data obtained from 153 business unit standard managers. # 2000 Elsevier Science Limited. All privileges reserved.
As Hopwood's (1972) seminal paper, the
cash strategy literature shows great desire for
understanding conceivable eects of budgetary control
styles. It is generally maintained that the chance
of so-called dysfunctional behavior is aected by simply
the rigidity of financial controls. A rigid budgetary control style is one out of which personnel, mostly at management organization levels, are evaluated
primarily on if they achieved all their
budget. Once evaluated in this way, managers are
held fully accountable for their very own performance since
Data availability: study data can be bought from the writer
* Tel.: +1-213-740-3583; send: +1-213-747-2815.
E-mail address: [email protected] usc. edu (W. A. Van jeder Stede).
scored by the budget. This implies that salary,
methods, and profession prospects become highly, if
not totally, dependent on the managers' capability to
meet the spending budget. Managers whom miss the targets
deal with the prospect of interventions by simply upper administration, the loss of organizational resources, the losing of annual bonuses, and finally the loss of
all their job (Merchant & Manzoni, 1989). Below
these circumstances, managers might look for methods
to protect themselves from the disadvantage risk of
absent budget goals and the stigma normally
attached with underachievers (Lukka, 1988; Onsi,
1973; Schi & Lewin, 1970). Feasible ways of
security can be obtained simply by negotiating to get
highly achievable targets (i. e. slack creation) or by
focusing on business issues that improve current
0361-3682/00/$ - discover front matter # 2k Elsevier Science Ltd. Every rights arranged. PII: S0361-3682(99)00058-6
Watts. A. Van der Stede / Accounting, Organizations and Society 25 (2000) 609±622
period performance while sometimes causing harm
towards the long-term eectiveness of the ®rm (i. e.
managerial short-term orientation). 1
However , scientific evidence relating to alleged
unable to start consequences of the rigid financial
control style has been equivocal. In contrast to
Hopwood (1972), Otley (1978) located that strict
budgetary regulates did not result in increased levels
of budget-related tensions and found only combined
support due to its associated dysfunctional behaviors
(obtaining easy spending budget targets and having a shortterm view in the job). Instead, Otley (1978) found that a high emphasis placed on conference the budget
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