The effect of cost management knowledge on the relationship between budgetary participation and managerial performance

Abstract This study investigates the relationship between budget participation (BP), cost management knowledge and managerial performance. It draws on relevant previous research in the theory of work performance and accounting to formulate the research questions. Eighty-three managers from Finnish companies participated in the study. Data were collected from the managers using a mail questionnaire. The results indicate that managers’ cost management knowledge, and especially the balanced perspective of cost management knowledge, moderates the effect of BP on self-perception of managerial performance. It was specifically found that the effect of BP on perceived managerial performance becomes more positive when managers’ cost management knowledge increases. High perception of managerial performance is obtained when both the BP and managers’ cost management knowledge are high. Our results suggest that organizations should improve the cost management knowledge of managers who participate in the budgeting process.

[1]  Edwin A. Locke,et al.  Cognitive and motivational effects of participation: A mediator study , 1994 .

[2]  Thomas H. Jerdee,et al.  The Job(s) of Management , 1965 .

[3]  Peter. Brownell Budgetary Systems And The Control Of Functionally Differentiated Organizational Activities , 1985 .

[4]  Alan S. Dunk,et al.  Budgetary participation, agreement on evaluation criteria and managerial performance: A research note , 1990 .

[5]  V. Chong,et al.  The Role of Feedback on the Relationship Between Budgetary Participation and Performance , 2002 .

[6]  Robert B. Welker,et al.  Testing a Model of Cognitive Budgetary Participation Processes in a Latent Variable Structural Equations Framework , 1996 .

[7]  James E. Hunton,et al.  Succeeding in managerial accounting. Part 2: a structural equations analysis , 2000 .

[8]  Miriam Erez,et al.  Participative goal-setting: Social, motivational, and cognitive factors. , 1986 .

[9]  George C. Thornton,et al.  THE RELATIONSHIP BETWEEN SUPERVISORY- AND SELF-APPRAISALS OF EXECUTIVE PERFORMANCE , 1968 .

[10]  Detmar W. Straub,et al.  Validating Instruments in MIS Research , 1989, MIS Q..

[11]  V. Govindarajan IMPACT OF PARTICIPATION IN THE BUDGETARY PROCESS ON MANAGERIAL ATTITUDES AND PERFORMANCE: UNIVERSALISTIC AND CONTINGENCY PERSPECTIVES* , 1986 .

[12]  Lokman Mia,et al.  Managerial attitude, motivation and the effectiveness of budget participation☆ , 1988 .

[13]  A. Hopwood An Empirical Study of the Role of Accounting Data in Performance Evaluation , 1972 .

[14]  Lokman Mia,et al.  The impact of participation in budgeting and job difficulty on managerial performance and work motivation: A research note☆ , 1989 .

[15]  Glenn A. Welsch Budgeting: profit planning and control , 1971 .

[16]  Shelley A. Kirkpatrick,et al.  Locus of Knowledge as a Determinant of the Effects of Participation on Performance, Affect, and Perceptions , 1995 .

[17]  Hun-Tong Tan,et al.  Accountability Effects on Auditors' Performance: Influence of Knowledge, Problem-Solving Ability, and Task Complexity , 1999 .

[18]  E. A. Locke,et al.  Participation in Decision-Making: One More Look , 1979 .

[19]  Robert Libby,et al.  Determinants of judgment performance in accounting settings: Ability, knowledge, motivation , 1993 .

[20]  C. Lau,et al.  The impact of budget emphasis, participation and task difficulty on managerial performance: A cross-cultural study of the financial services sector , 1998 .

[21]  Hossein Nouri,et al.  The relationship between budget participation and job performance: The roles of budget adequacy and organizational commitment , 1998 .

[22]  David A. Waldman,et al.  Putting Together the Pieces: A Closer Look at the Determinants of Job Performance , 1989 .

[23]  Graeme Harrison THE CROSS-CULTURAL GENERALIZABILITY OF THE RELATION BETWEEN PARTICIPATION, BUDGET EMPHASIS AND... , 1992 .

[24]  C. B. Schoonhoven Problems with contingency theory: testing assumptions hidden within the language of contingency "theory.". , 1981, Administrative science quarterly.

[25]  James E. Hunton,et al.  Succeeding in Managerial Accounting, Part 1: Knowledge, Ability, and Rank , 2000 .

[26]  Peter Brownell,et al.  The effect of participative budgeting on job satisfaction and performance: Role ambiguity as an intervening variable , 1988 .

[27]  C. Lau,et al.  The Effects of procedural justice and evaluative styles on the relationship between budgetary participation and performance , 2002 .

[28]  Richard P. Bagozzi,et al.  Assessing Construct Validity in Organizational Research , 1991 .

[29]  Robert Libby,et al.  Tacit managerial versus technical knowledge as determinants of audit expertise in the field , 1997 .

[30]  K. E. Southwood Substantive Theory and Statistical Interaction: Five Models , 1978, American Journal of Sociology.

[31]  Keith Davis,et al.  The case for participative management , 1963 .

[32]  E. Prien,et al.  ASSESSMENTS OF HIGHER-LEVEL PERSONNEL: III. RATING CRITERIA: A COMPARATIVE ANALYSIS OF SUPERVISOR RATINGS AND INCUMBENT SELF-RATINGS OF JOB PERFORMANCE , 1962 .

[33]  Milton Derber Worker Participation in Israeli Management , 1963 .

[34]  M. Koslowsky,et al.  Participation and Empowerment in Organizations: Modeling, Effectiveness, and Applications , 1999 .

[35]  V. Vroom,et al.  Industrial Social Psychology , 1961 .

[36]  M. Ford Motivating Humans: Goals, Emotions, and Personal Agency Beliefs , 1992 .

[37]  M. Maehr Advances in Motivation and Achievement , 1991 .

[38]  F. Gul,et al.  Decentralisation as a Moderating Factor in the Budgetary Participation-Performance Relationship: Some Hong Kong Evidence , 1995 .

[39]  Michael D. Shields,et al.  Antecedents of participative budgeting , 1998 .

[40]  Edwin A. Locke,et al.  Participation in decision making: An information exchange perspective. , 1997 .

[41]  Michael D. Shields,et al.  Cost Knowledge and Cost‐Based Judgment Performance , 2001 .

[42]  D. Otley BUDGET USE AND MANAGERIAL PERFORMANCE , 1978 .

[43]  David A. Waldman,et al.  THE CONTRIBUTIONS OF TOTAL QUALITY MANAGEMENT TO A THEORY OF WORK PERFORMANCE , 1994 .

[44]  V. Chong,et al.  The effect of role stress on budgetary participation and job satisfaction-performance linkages: A test of two different models , 2000 .

[45]  Melvin Blumberg,et al.  The Missing Opportunity in Organizational Research: Some Implications for a Theory of Work Performance , 1982 .

[46]  I. Eggleton,et al.  The interactive effect of budget emphasis, participation and task difficulty on managerial performance: a cross‐cultural study , 1997 .

[47]  Paul L. Walker,et al.  The effects of instruction and experience on the acquisition of auditing knowledge , 1994 .

[48]  Peter Ellis,et al.  Social Psychological Aspects of Environmental Psychology. by John M. Darley and David T.Gilbert. To appear in G. Lindzey and E. Aronson (eds) Handbook of Social Psychology (3rd Edit.). Reading, Massachusetts: Addison-Wesley, in press. , 1984 .

[49]  G. Strauss,et al.  Workers Participation: A Critical View , 1970 .

[50]  Michael E. Porter,et al.  The global competitiveness report 2000-2001 , 2002 .

[51]  E. A. Locke,et al.  Participation in decision making: When should it be used? , 1986 .

[52]  Vincent K. Chong,et al.  Budget Goal Commitment and Informational Effects of Budget Participation on Performance: A Structural Equation Modeling Approach , 2002 .

[53]  Peter. Brownell Leadership style, budgetary participation and managerial behavior , 1983 .

[54]  C. Fornell,et al.  Evaluating structural equation models with unobservable variables and measurement error. , 1981 .

[55]  Frank G. H. Hartmann,et al.  The appropriateness of RAPM: Toward the further development of theory , 2000 .

[56]  S. Fiske,et al.  The Handbook of Social Psychology , 1935 .

[57]  P. Chalos,et al.  Participative Budgeting and Managerial Performance , 1989 .

[58]  M. Hirst,et al.  The role of budgetary information in performance evaluation , 1990 .

[59]  J. Hair Multivariate data analysis , 1972 .