The 2 IBSM, International Conference on Business and Mangement
2 – 4 October 2013, Chiang Mai - Bangkok
Effect of Budget Participation, Budget Emphasis, and Fairness Perception on the Budgetary Slack with Managerial Trustworthy Behavior as
Moderating Variable at Manufacturing Company in Jakarta
Megawati Oktorina megawati.okt@atmajaya.ac.id Yanuar Nanok Soenarno yanuar.nanok@atmajaya.ac.id Department of Economics, Atma Jaya Catholic University of Indonesia
Abstract
Purpose: This study examines the effect of budget participation, budget emphasis, and fairness perception to budgetary slack. In addition, this study also adds moderating variable to determine how the effect of managerial trustworthy behavior to the relationship between budget participation, budget emphasis, fairness perception and budgetary slack correlation.
Methodology: the study using Manufacturing companies which located in
Jakarta for population. Questionnaires were distributed to the finance manager or production manager or anyone who is an actor-for budgeting process on the company. Data collection method was purposive sampling. Total of 113 questionnaires distributed, only 108 questionnaires can be used for this study.
The statistical methods used to analyze the data and the research problem is structural equation models with partial least square approach using SmartPLS
2.0 software.
Finding: The results of this study prove that budgetary participation and budget emphasis affecting budgetary slack. Meanwhile, fairness perception does not significantly affect the budgetary slack. The test results showed that the moderation of managerial trustworthy behavior affects the relationship between budget emphasis and budgetary slack. However, the moderating variable does not effect in the relationship between budgetary participation and budgetary slack. Benefit from the this study is the behavior of managers in making budgetary slack can be significantly affected by factors that are directly related to the budget, but the influence of these factors on budgetary slack can be changed by other factors, in this study managerial trustworthy behavior.
Originality: The study is expected to contribute the literature regarding the budget where this research include psychological variables such as justice perception and managerial trustworthy behavior so that the results obtained are getting richer and multidisciplinary
Keywords: budget participation, budget emphasis, fairness perception, budgetary slack, managerial trustworthy behavior.
nd
The 2 IBSM, International Conference on Business and Mangement
2 – 4 October 2013, Chiang Mai - Bangkok
INTRODUCTION
Budget is important component in company’s planning and management. A manager has to arrange a good budget because budget is dealing with the whole company’s operations (Siegel et al., 1989). Budget also funtions to coordinate, communicate, motivate and evaluate the achievement ( Kennis, 1979). Beside motivating the performance of low level manager , budget also facilitates the financial planning (Chow, et al., 1988). Demski and Feltham ( Covaleski et al., 2003) view budget as deciion facilitating as well as decision influencing. Through this all decisions are facilitated by increasing sub units coordination as well as influencing decisions in its control and evaluation over performance and management compensation. In budgeting, top managers need to involve their staffs so that all of needs and interests are considered fulfilled by the management. This process is called budget participation. Budget participation is defined as employees communication concering local condition to the ownerso that the report will contribute to production planning and employees compensation (Covaleski et al., 2003). Argyris (Covaleski et al., 2003) states that the employee involvement in budget planning may avoid pseudo participative budgeting so that it decreases employee deviant behaviors. In order to obtain such situation, the
