A Study of the Relations among Budgetary Participation, the Propensity to Create Budgetary Slack, Budgetary Slack, and Managerial Performance

This paper investigates the relationships between budgetary participation and managerial performance, as well as budgetary participation and budgetary slack. By survey research, this study seeks to explain the process by which participation in budget setting enhances managers' performance, and the process through which participation reduces budgetary slack. A model is also developed to demonstrate not only how the propensity to create slack acts as an intervening variable in the link between budgetary participation and budgetary slack, but also how budgetary slack acts as an intervening variable in the link between budgetary participation and managerial performance. Results in this study support the proposed relationships between each pair of variables, but do not provide evidence to support the proposed mediating effect of propensity to create slack and budgetary slack. Empirical evidence indicates that the relationship between budgetary participation and managerial performance is primarily accounted for by the direct effect between the two variables. Moreover, the relationship between budgetary participation and budgetary slack can be accounted for by the direct effect between the two variables.