Title
An experimental investigation of budget rejection authority placement in three-tier hierarchies
Date of Award
Spring 5-6-2019
Degree Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Accountancy
First Advisor
Douglas E. Stevens
Second Advisor
Michael J. Majerczyk
Third Advisor
Ivo D. Tafkov
Fourth Advisor
Jason Kuang
Abstract
In a participative budgeting setting, this paper examines the relative merits of different choices regarding to whom to assign budget rejection authority in a hierarchical firm. While the participative budgeting literature has traditionally examined dyadic firms (i.e. firms consisting of only an owner and a worker), many firms exist as taller hierarchies. In such firms, the question of where to locate an important budgetary control – rejection authority – in order to promote improved budgetary reporting becomes meaningful. It is hypothesized that delegating budget rejection authority to the manager leads to increased slack consumption by the agent in comparison to the situation in which the principal retains such authority. Research questions address whether the agents report more accurately when both the manager and the principal have rejection authority by comparison to the arrangement in which only one of these individuals hold such power. Results generally suggest that delegating rejection authority to the manager does not entail agency related costs. Further, agent slack capture is least when the control is duplicated but this benefit comes at a substantial decrease in the amount of surplus the firm can capture.
DOI
https://doi.org/10.57709/14323234
Recommended Citation
Wilhelm, James C., "An experimental investigation of budget rejection authority placement in three-tier hierarchies." Dissertation, Georgia State University, 2019.
doi: https://doi.org/10.57709/14323234