Research On Alleviating Subordinates' Propensities To Create Budgetary Slack In Enterprise From The Perspective Of Angency Theory

Budgeting has become a useful management control tool in Chinese enterprises while budgetary slack may lead to dysfunction or even invalidity.Subordinates' propensities of creating budgetary slack(SPOCBS)tend to be a psychological motivation of them to build budgetary slack.So how to eliminate or mitigate their propensities will make much sense to restrain their slack behavior.In view of the agency theory,the paper reveals that budgetary slack is an agent problem of budget management,which derives from interest conflict and information asymmetry between superiors and subordinates,and budgetary participation is an important precondition of SPOCBS.And it focuses on information asymmetry,and analyzes the other determinants of participative budgeting and their influencing path on SPOCBS,establishes several relevant econometric models,and utilizes questionnaire data to make regression analysis.According to agency theory this paper researches the impacts of pay scheme and reputation mechanism on decreasing and controlling SPOCBS and information asymmetry,and testifies and finds out the most efficient pay scheme and reputation mechanism by experiments.Finally,the paper proposes the comprehensive strategies for enterprises to control SPOCBS.The paper is theoretically worthy and practically significant to improve enterprises' budget management system.Firstly,the paper analyzes the main incentives of SPOCBS are interest conflict,information asymmetry and budgetary participation from the agency theory.Focusing on the participative budgeting,the paper finds out other related determinants of budget management system(budgetary emphasis,fairness and characteristic of budgetary goals),this paper puts forward with various incentives under the influence of SPOCBS tendency,design a nonlinear measurement model,and use the Likert questionnaire to collect data and implement regression analysis.The empirical results reveal that one-factor and three-factor influence of information asymmetry,budgetary participation and budgetary emphasis.Information asymmetry and budgetary emphasis are individually positively related to SPOCBS,while budgetary participation is negatively related to SPOCBS.Also there is interaction on SPOCBS among these three factors.When information asymmetry,budgetary participation and budgetary emphasis are high(low),SPOCBS is high(low).Interactional justicebetween superiors and subordinates is negatively related to SPOCBS,and difficulty of budgetary goals is positively related to SPOCBS.Secondly,pay scheme can reduce information asymmetry and SPOCBS of the participative budgeting based on the agency theory.After contrasting five common pay schemes,this paper reaches a conclusion of their advantages and disadvantages,and finds out their roles played in reducing information asymmetry and SPOCBS.On account of practicability,jointly deciding contract target pay scheme and improved traditional budget-based pay scheme(mixed with auxiliary incentive mechanism—disclosure of budget-related horizontal information between subordinates or/and resource allocation between subordinates)are taken as the objects of study in the experiment,and traditional budget-based pay scheme is chosen as the benchmark.The experimental results suggest that improved traditional budget-based pay scheme mixed with two above auxiliary incentive mechanisms is superior to jointly deciding contract target pay scheme,traditional budget-based pay scheme,and the improved traditional budget-based pay scheme mixed with one above auxiliary incentive mechanism in deceasing SPOCBS and motivating subordinates to release the true budget-related information.And after the reward and punishment about efficiency is introduced,subordinates' loaves on the job originated from a lot of difference between their productivity will be removed significantly,and experimental effects will make better.Thirdly,the paper analyzes the relation between reputation and information asymmetry,expounds reputation mechanism plays a useful role on decreasing information asymmetry and SPOCBS of the participative budgeting,and designs an index to measure subordinates' reputation using the relevant models for reference and two reputation-based discretionary rewards employed in certain circumstance,which includes the promotion with salary increase and the higher power to determine the budgetary standards.The experimental results indicate the reputation index designed is effective,and two reputation-based discretionary rewards employed as certain circumstance can inspire subordinate to cut down SPOCBS,to disclose their true private information and to improve their performance,and the former is better than the latter.Finally,inspired by the conclusions of theoretical analysis and empirical research,this paper proposes the comprehensive strategies to alleviate SPOCBS in order toimprove organizational internal environment and eliminate the bad incentives from their sources,such as planning and coordinating the organizational goals,building efficient and clear information communication,constructing the multi-dimensional performance evaluation system for employee,bettering some factors of budget management system,reforming pay scheme and introducing reputation mechanism.