Budgeting Gamesmanship in Managers

This paper reports the findings of research concerning the budgeting gamesmanship of managers in firms operating in all sectors of the economy. Budgeting gamesmanship in this study is defined as the deliberate and premeditated manipulation of the current year's sales, cost, and profit forecasts by managers, and projects an overly conservative image into their budgets. The objectives of this study are: (1) To understand the role of budgeting on performance measurement, (2) To gain an understanding of budgeting gamesmanship behavior, (3) To examine the relationship among organizational factors, asymmetric information problem of budget and budgeting gamesmanship behavior. Based on a judgment sampling approach, samples consisting of 104 firms from manufacturing industry and 51 firms from service industry were selected. Questionnaires were filled out by personally interviewing managers in each firm. The results of this research reveal the following important information: 1. On average, one half of managers in firm sometimes show budgeting gamesmanship behavior in Taiwan. Budgetary gamesmanship behavior was related to the organizational culture and performance measurement system based on budgeting. 2. Over 75% of the firms in Taiwan used the budgeting target as the indicator of performance measurements. 3. Methods to avoid budgeting gamesmanship behavior include: strengthening forecasting ability with quantitative models and making budgeting targets reasonable and attainable. 4. There were no significant relationship between the other organizational factors (such as firm's scale and product complexity, etc.) and budgetary gamesmanship behavior.