An Empirical Study On The Effects Of Resource Allocation And Horizontal Information Asymmetry On Budget Slack And Performance

Widely used in many enterprises, budget management was hardly seen succeeding in practice. Business executives and academics frequently criticize budget- based compensation plans as providing incentives for subordinates to build slack into proposed budgets.Based on reviewing literature related to the functions of budgeting, the cause of budget slack and the methods used to control budget slack, From the views of economics and psychology, we examine whether either of two practices-using budgets to allocate scarce resources, or providing information about co-workers reduces budget slack and increases subordinate performance when budgets for performance evaluation by experiment.We get the results as follows:At first,using budgets for both resource allocation and performance evaluation not only reduces budget slack, but also increases subordinates' effort and task performance. These results highlight the synergies between the planning (resource allocation) and control (performance evaluation) functions of managerial accounting practices such as budgeting.Secondly,Our results also suggest that providing information about co-workers among subordinates increases subordinate performance when budgets for performance evaluation.Final on the basis of empirical analysis, the paper put forward corresponding suggestion.