1 S2

Accounting, Organizations and Society 25 (2000) 609±622

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The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation$
Wim A. Van der Stede*
University of Southern California, Leventhal School of Accounting, Los Angeles, CA 90089-0441, USA

Abstract
Previous studies have provided contradictory evidence with respect to the e€ect of rigid budgetary controls on slack and other dysfunctional behaviors. One motivation for the current study was to test whether spillover e€ects exist between two alleged dysfunctional consequences of a rigid budgetary control style: budget slack creation and managerial short-term orientation. The data support this contention: reducing one form of dysfunctional behavior (slack creation) through rigid controls seems to spill over into another form (stronger management focus on business matters that a€ect short-term results). However, the budgetary control styles that organizations implement, as well as the behaviors that they encourage, may be a€ected by two important antecedents: business unit past performance and competitive strategy. The results indicate that business units that either pursue a di€erentiation strategy or have been more pro®table are subject to less rigid budgetary controls, which augment the propensity to build slack as well as the tendency for managers to think long-term. These relationships are tested in a structural equation model on survey data obtained from 153 business unit general managers. # 2000 Elsevier Science Ltd. All rights reserved.

Since Hopwood 's (1972) seminal paper, the budgeting literature has shown great interest in understanding possible e€ects of budgetary control styles. It is generally maintained that the incidence of so-called dysfunctional behavior is a€ected by the rigidity of budgetary controls. A rigid budgetary control style is one in which employees, mostly at management organization levels, are

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