Budgeting and the propensity to create budgetary slack

Abstract

This paper reports the results of a field study designed to investigate how managers' propensities to create budgetary slack are affected by the budgeting system and the technical context. The results show that propensities to create slack are lower where managers participate actively in budgeting, particularly when technologies are relatively predictable. But such propensities are higher if a tight budget requires frequent tactical responses to avoid overruns.