Article2000

Budgeting: An Experimental Investigation of the Effects of Negotiation

Joseph G. Fisher · James R. Frederickson · Sean A. Peffer

154 citations0/0 files storedThe Accounting Review

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Accounting and Organizational Management Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting

Abstract

Despite the common use of negotiations to set budgets in practice, accounting research has focused primarily on budgets set unilaterally by subordinates, while goal-setting research in management has focused primarily on budgets set unilaterally by superiors. In addition, budgeting research in accounting has focused almost exclusively on the planning aspects of budgets to the exclusion of their motivational aspects. This study complements prior research in two ways. First, the study examines how budgets and the economic consequences of the budget-setting process differ when budgets are set through a negotiation process vs. when set unilaterally. The study also considers factors associated with negotiation agreement and the relation between agreement and the economic consequences of negotiated budgets. Second, the economic consequences examined are budgetary slack and subordinate performance, allowing us to address the trade-offs between the planning and motivational aspects of budgets. Negotiated budgets differ from unilaterally set budgets in a manner consistent with social norms and/or information transfer occurring during negotiations. Both the budgets and the economic consequences of the budgetsetting process differ when budgets are set through a negotiation process where superiors have final authority in the event of a negotiation impasse vs. when set unilaterally by superiors. Further, negotiation agreement significantly affects the economic consequences of negotiated budgets. Budgets set through a negotiation process ending in agreement contain significantly less slack. A failed negotiation followed by superiors imposing a budget has a significant detrimental effect on subordinate performance.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 154 citations exist upstream.

References

1985The effect of bonus schemes on accounting decisions 2011The effects of bonus schemes on accounting decisions 1982Rational cooperation in the finitely repeated prisoners' dilemma 1984The Art and Science of Negotiation.1968Toward a theory of task motivation and incentives 1990A theory of goal setting & task performance 2012Journal of Management Accounting Research 1994Negotiation in social conflict

Cited by

2010Why Business Unit Controllers Create Budget Slack: Involvement in Management, Social Pressure, and Machiavellianism 2002The effect of information asymmetry on negotiated budgets: an empirical investigation 2011A Proposed Framework for Behavioral Accounting Research 2002The impact of reputation and variance investigations on the creation of budget slack 2009An Empirical Examination of Goals and Performance-to-Goal Following the Introduction of an Incentive Bonus Plan with Participative Goal Setting 2006

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.