Subordinate Participation And Budgetary Difficulty In Budget-setting

The business budgeting has generally been accepted as a basic tool for planning and controlling in modern business groups. Budgetary behaviors are related to people involved in budgetary management systems. Performance evaluation and the incentive scheme are tied with budgetary results and therefore the budgets, on occasion, induce people to behave dysfunctionally or myopically. In budgeting process, people are most likely to intervene in budget-setting for personal purposes. So the effectiveness of budgeting normally depends on the effectiveness of participation and budgetary difficulties. Western researchers have done lots of work on budgetary participation and difficulties. Most of conclusions are in contrary. In China, although more and more literature is concerned on budgetary behaviors with helpful conclusions, little researches systematically discuss behaviors in budget-setting.The purpose of this paper is to explore systemmatically the behavioral aspects of budgets and present empirical evidences of relationships between budgeting and its consequences, between budgeting and its determinants. On the basis of agency theory, expectation theory, general system theory and behavioral sciences, a logic framework for discussing behavioral issues of budget-setting is built up. The characteristics of budgeting system are subordinate participation (budgetary participation) and goal difficulties (budgetary difficulties). The consequences of budget system are budgetary attitude and managerial performance. This work uses survey method to investigate managers of large enterprises in China. The main conclusions are the following:Sorbordinate participation is positively related to budgetary consequence (budgetary attitude and managerial performance) which indicates budgetary participation provides managers an opportunity of positive information communication. This kind of information communication strengthens managers' perceived fairness and organizational commitment. Managers' motivation (budget attitude) and managerial performance are positively related to perceived performance evaluation and budget difficulties. In budgetary management, budget has motivational effects only when it is connected with reward system. The relationship of budgetary participation and budgetary difficulty are moderated by personal characteristics and organizational characteristics.