1 S2

 1 S2 Essay

Accounting, Companies and Contemporary society 25 (2000) 609±622

The relationship among two implications of financial

controls: budgetary slack creation and bureaucratic

short-term orientation$

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 e€ect of rigid budgetary controls upon slack and other dysfunctional behaviors. One inspiration for the existing study was to test if spillover e€ects 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 a€ect initial results). Yet , the financial control models that businesses implement, plus the behaviors that they can encourage, can be a€ected by two important antecedents: organization unit earlier performance and competitive technique. The effects indicate that business units that either follow a di€erentiation 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 e€ects of budgetary control

styles. It is generally maintained that the chance

of so-called dysfunctional behavior is a€ected 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

upon demand.

* 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 e€ectiveness 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

lead to...

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