Research On Budgetary Slack In ABC Group Company

As an operating mechanism of internal management, the comprehensive budgetwith a wide range of effects that can reflect the full range of business requirements, iswidely used in the foreign and domestic enterprises. But with the passage of time andchanges of the environment, comprehensive budget management has not gain theexpected effect in the process of implementing, some problems that don’t adapt tomodern enterprise have come out gradually, the budget slack is one of them. Thebudget slack widespread in the modern enterprises, which lead to a series ofeconomic consequences, making enterprise the budget management to departure fromexpected goals, affecting the survival and development of enterprises. If thecompany can not control and solve the problem of budget slack in the budgetmanagement very well, it is only just talk, the budget is just a waste of enterpriseresources, and Company is in pursuit of the lowest benefit.The research object of this thesis is ABC Group Company. It is theFAW Group Company, has9subsidiaries,16joint venture Company. Becausethe company scale is huge, Budget management is not good, so there are a lot ofproblems, budget slack is one of them. In the budget management of ABC groupcompany, according to the budgeted performance to review the company, subordinatecompany budget executors to finish the budget, willing to make loose budgetstandard, in order to complete the task, the resource amount resource budget is greaterthan the actual need, the output budget less than output may, this the phenomenon isthe budget slack. Simply speak, ABC group company’s leaders hope Subsidiarycompany can try to make the biggest achievements, but the subsidiary companydidn’t do it. So it generated a difference between, the difference is budgetary slack or budget loose. Budgetary slack will have a difference. The difference is not good forthe whole enterprise, managers can cover the elastic space errors affect the objectivity,performance evaluation, thus affecting the overall effect of budget management.Budget slack phenomenon is general among the most companies, leading to a seriesof economic consequences, and make the budget management and the expected targetof the enterprise are divergent, affect the enterprise’s survival and long-termdevelopment. The factors which lead to budgetary slack are the key to prevention andcontrol the budgetary slack, and also the starting point of this study.This paper defines the concept of the budgetary slack, based on the domestic andforeign scholars’ studies, that the budgetary slack include “prepare relaxation” and“the implementation relaxation", at the same time, points out the nature isrent-seeking behaviors of agents. From the point of Behavioral science theory,principal-agent theory and game theory analyzes the causes, combining with the ABCgroup company’s process of budgetary management analysis the factors affectingbudgetary slack, the induction of budget slack generated from three angles ofbudgetary participation, information asymmetry and the existing managementsystem.The results show that: the budget slack runs through the whole process ofbudget management, the whole process of budget preparation andimplementation.The participatory budget management, asymmetric information isthe objective basis of budget slack, budget participation in the pursuit of interest is theinternal cause of budget slack, the existing management system is the foundation ofthe system of budget slack formation. According to the research conclusion, proposedthe prevention and control of budget slack phenomenon appears measures to preventand control the budget slack phenomenon into three aspects should be: The firstaspect of the problem of budget slack in order to avoid the budget measures; secondaspects in order to avoid the problem of budget slack in the budget implementationmeasures; third aspects for the performance evaluation mechanism and incentive mechanism through the establishment of a more perfect to improve budget slackphenomenon. Through the analysis and study of budget slack, hope can prevent andcontrol ABC Group Company effectively.