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https://hdl.handle.net/2142/71359
Description
Title
Budget Slack
Author(s)
Milne, Ronald Arthur
Issue Date
1981
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
The definitions of budget slack found in existing literature are inconsistent and insufficient for empirical research. Therefore, a definition of budget slack is proposed and it is set forth in terms which are operational and useful for empirical research. Budget slack is defined from the perspective of the owners of the firm and as the result of intentional acts by managers.
The motivation and job satisfaction literature provides the basis for explaining how and why managers create and perpetuate budget slack. A synthesis of this literature provides a model which indicates that managers seek budget slack because it enhances their perceived performance, which, in turn, leads to intrinsic and extrinsic rewards. These intrinsic and extrinsic rewards result in job satisfaction.
A tentative explanation of how and why managers create and perpetuate budget slack is presented as a conceptual framework. This explanation claims that managers derive job satisfaction from budget slack, especially effectiveness slack, and that to the extent that managers intentionally do not maximize profit, budget slack is the vehicle for distributing the resulting excess costs within the organization.
Testable hypotheses are derived from the conceptual framework and submitted to empirical testing. The results of three experiments are reported; they generally support the explanation set forth in the conceptual framework.
The findings and conclusions are reported, and recommendations for future research are given.
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