Budgetary Participation: The Effects of Information Asymmetry, Goal Commitment, and Role Ambiguity on Job Satisfaction and Performance

Abstract This study proposes a comprehensive model which empirically investigates the antecedent, mediating and outcome variables of budgetary participation. We propose that the information asymmetry between superiors and subordinates creates the need for budgetary participation. Accordingly, this study hypothesizes that the outcomes (i.e., job satisfaction and performance) of budgetary participation will be mediated by goal commitment and role ambiguity. Based on a questionnaire survey of 194 middle level managers in Turkey, this study found that role ambiguity mediates the budgetary participation-job satisfaction and budgetary participation-performance relationships. The results are consistent with the view that the primary benefit of budgetary participation is to decrease role ambiguity, leading to more job satisfaction and better performance. Furthermore, we found that goal commitment mediates the budgetary participation-performance relationship. This result suggests that participation in the budgeting process increases goal commitment leading to better performance. Key words: Budgetary participation, information asymmetry, goal commitment, role ambiguity, job satisfaction, performance

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Budgetary Participation: The Effects of Information Asymmetry, Goal Commitment, and Role Ambiguity on Job Satisfaction and Performance 1. Introduction There is an abundance of research investigating the relationship between participative budgeting and performance. The popularity of this topic is based on the widely-held premise that participation in decision- making in general, and in the budgetsetting process in particular, is the ideal approach to governance. Researchers have argued that participative budgeting leads to more job satisfaction and better performance for subordinates because it leads them to perceive that they are being treated by their superiors as valuable partners in the decision- making process, which in turn creates higher moral, greater motivation, and higher commitment. While previous research has shed some important light on the relationships between budgetary participation and performance, few studies have used a comprehensive model which considers not only the antecedent conditions which create a demand for participation, but also variables that mediate the relationships between budgetary participation and performance. Some researchers have argued that incorporating the antecedents and mediating variables may lead to a better understanding of the relationship between budgetary participation and performance (e.g., Hopwood, 1976; Brownell, 1982; Chenhall & Brownell, 1988; Kren, 1992; Shields & Young, 1993; Shields & Shields, 1998; Chong, 2002; Chong et al, 2006; Parker & Kyj, 2006; Leach-Lopez et al, 2007; Chong & Johnson, 2007). For example, Shields & Young (1993) suggest that the mixed results of previous studies are due to the use of incomplete models. They argue that researchers need to develop models that consider the particular antecedents of participative budgeting and investigate the

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consequences of participative budgeting by taking theoretically- based intervening variables into account. With the exception of two recent studies (e.g., Maiga 2005; Chong & Johnson, 2007), previous studies have not employed a comprehensive model which considers the antecedents, intervening variables and consequences of participative budgeting. Both studies, however, use task uncertainty as the antecedent of budget participation. In contrast to these two previous studies, our study uses an agency theory perspective in arguing that the need for budgetary participation is primarily the result of the information asymmetry between superiors and subordinates which characterizes the budgeting process (Penno, 1990; Kirby et al, 1991; Shields & Young, 1993).Therein, we also argue that goal commitment and role ambiguity will mediate the relationship between budgetary participation and job satisfaction as well as budgetary participation and performance. Furthermore, most previous studies on budgetary participation were conducted in developed countries such as the United States and Australia. Few studies have looked at these issues in developing countries. Our study addresses this gap by investigating the antecedents, mediating variables, and consequences of budgetary participation in Turkey, a developing VISTA country that is playing an important role in international markets (the term VISTA refers to Vietnam, Indonesia, South Africa, Turkey and Argentina and has been coined in recent years to address the undeniable and inevitable economic emergence of this new set of actors) (Watanabe, 2010). The impacts of budgetary participation on various outcome variables might be different in this setting than in a developed country. For example, Jermias & Setiawan, (2008) argue that top management in developing countries is often reluctant to share information with subordinates due to the fear that their subordinates will manipulate and

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misinterpret that information. This is partly because many senior managers are politicians and like to maintain a power differential with their subordinates (Alam, 1997). In a similar vein, Uddin & Hopper, (2001) assert that managers in developing countries might participate in the budgeting process because they fear being punished, not because they want to make meaningful contributions. The authors state that the reason for this is that these countries are characterized by high unemployment rates and do not adequately recognize and protect human rights. Based on a questionnaire survey of 194 middle level managers, we hypothesized and found that budgetary participation decreases managers role ambiguity, resulting in more job satisfaction and better performance. Furthermore, we found that goal commitment mediates the budgetary participation-performance relationship such that it increases participation, which leads to higher commitment and, in turn, improved performance. However, the mediating effect of goal commitment on the relationship between budgetary participation and job satisfaction is not statistically significant. With respect to the antecedent variable, this study found that there is no significant relationship between information asymmetry and budgetary participation. This study contributes to existing literature on budgetary participation and practice in three ways. First, it proposes a more comprehensive model by incorporating the antecedent, mediating and outcome variables of budgetary participation. As such, this study shed some important lights on understanding the antecedents of budgetary participation and the conditions under which budgetary participation improves job satisfaction and performance. Second, the study was conducted in Turkey where there is no previous study on budgetary participation can be found in the literature. Turkey is a particularly interesting

setting for such a study because the government (i.e., municipalities) owns most Turkish large-size companies and therefore has a significant influence on the management of these companies. Our respondents are managers of firms owned by the Istanbul Metropolitan Municipality which operate in various sectors of the economy, including road construction, mineral water filling, sea transportation, car park management and technology. However, although the Istanbul Metropolitan Municipality owns these firms, they are by law private entities and have not been given the monopoly rights. Instead, they have to compete against private companies for contracts with the municipality. As most of these firms are the biggest entities in their respective sectors, they usually win their bids to undertake the municipalitys projects. Most of these firms also provide services to the public. Given these unique characteristics, the effect of participation on firm performance might be different for these firms as compared to firms in more conventional free-market economies, such as the US and Australia (where most of the previous studies were conducted). Finally, the results of this study indicate that the direct effect of participation on performance is not statistically significant. Thus, simply allowing managers to participate in the budgeting process does not have a beneficial effect for the company. The benefits of participation in budgeting process can only be realized when managers have a better understanding of their role, perceive the goals they are accountable for as attainable, and are committed to those goals. The remainder of the paper is organized as follows. Section two discusses previous related literature in order to develop the hypotheses. Section three explains the sample selection, research design and how to measure the variables used in this study. Section four presents the results of the statistical analyses. Section five provides a

general discussion of the main results, the limitations of the study and directions for future research in this area. 2. Related Literature and Hypotheses Participative budgeting has attracted much attention in accounting and management literature. Earlier studies tend to focus on the consequences of participative budgeting and have reported mixed results (e.g., Foran & DeCoster, 1974; Milani, 1975; Kenis, 1979; Brownell, 1981; 1982; 1983; Merchant 1985; Brownell & McInnes 1986; Chenhall 1986). Shields & Young (1993) argue that the mixed results of participative budgeting research are due to the incomplete models used by previous researchers. Brownell (1982) suggests that researchers need to specify the conditions under which budgetary participation would be effective before investigating its consequences. Shields & Young (1993) take this issue one step further in proposing that researchers need to develop theories that consider not only the antecedents of participative budgeting, but also the variables that might mediate the relationship between participative budgeting and its various outcomes (i.e. job satisfaction and performance). More recent studies on participative budgeting have incorporated antecedents and/or mediating variables (e.g., Chong, 2002; Wentzel, 2002; Lau & Tan, 2003; Chong et al., 2006; Parker & Kyj, 2006; Leach-Lopez et al., 2007; Chong & Johnson, 2007). With the exception of Chong & Johnson, (2007) and Maiga (2005), none of these studies incorporate the consequences of participative budgeting. The study reported here differs from Chong & Johnson (2007) and Maiga (2005) in three ways. First, we use information asymmetry as the antecedent of budgetary while the other two studies use task uncertainty as the dependent variable. Shield & Young (1993) argue that information sharing is the most important antecedent for budgetary participation.

Second, our study uses both role ambiguity and goal commitment as mediating variables, while both Chong & Johnson (2007) and Maiga (2005) use only goal commitment. It is salient to note that Chenhall & Brownell (1988) found that the use of role ambiguity as a mediating variable provides useful insights into understanding the impact of budgetary participation on job satisfaction and performance. And third, we use both job satisfaction and performance as the outcome variables, while the other two studies only use performance. Following Shields & Young (1993), we use a comprehensive model by considering the antecedent (information asymmetry) and mediating variables (goal commitment and role ambiguity) of budgetary participation and its consequences (job satisfaction and performance)1. [Insert Figure 1 here] Antecedent variable: Information asymmetry Agency theory prescribes that subordinates have specific, private information about the tasks they are held accountable for (Baiman, 1990; Christensen, 1982). According to this theory, subordinates tend to be reluctant to reveal this information to their superiors unless the superiors incur significant monitoring costs or provide subordinates with an incentive for doing so. Nouri & Parker (1996) argue that budgetary participation allows subordinates to reveal their private information, which leads to better performance on their part and to economic gains for the company. Allowing subordinates to participate in the budgeting process suggests that they are perceived as
Job satisfaction has traditionally been thought by many researchers and practitioners to cause job performance. Recent studies (e.g., Bowling, 2007; Chen et al., 2004)), however, have revealed that the cause and effect relationship between job satisfaction and performance does not exist. Bowling, (2007), for example, found that job satisfaction and performance are related because the two constructs are the results of employees attitude toward their job. Therefore, in this study, we consider job satisfaction and performance as two separate outcomes of budgetary participation. Chenhall & Brownell (1988) also consider job satisfaction and performance as two separate outcomes of budgetary participation.
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valuable members of the company (Lawler, 1981). As a result, they are more likely to perceive their goals as consistent with their personal aspirations, which will in turn increase their motivation to achieve those goals (Locke, 1968; Hollenbeck et al, 1989). Participation in the budget-setting process also tends to result in more realistic budgets that set attainable targets. This will positively impact subordinates' motivation because they will see the targets as within their reach and worth their effort worth the effort (Locke, 1968). An extensive review of studies on participative- decision making led Locke & Schweiger (1979) to report that information sharing is the single most important determinant of the effectiveness of participative decision making. Similarly, Shields & Young (1993) contend that one of the primary benefits of budgetary participation is that it facilitates the sharing of information during the budget- setting process. Locke et al, (1981) concur with this observation in stating that the most successful function of participation is that it allows workers to express good ideas about how to improve their performance. It is therefore not surprising that budgetary participation is a common practice in countries such as the US. For example, 72% of the respondents in a survey of US firms (Umapathy, 1987) indicated that subordinates participated in the budget setting process. Merchant & Van der Stede (2007) argue that allowing employees to participate in and influence the process of setting their performance targets promotes information sharing with regard to business opportunities, corporate preferences, and available resources. They further assert that by participating in the process of setting their targets subordinates can provide useful information to superiors about business and operational opportunities and risks, given that they know more about their local workplace

environments than their superiors. Murray (1990) argues that participation may mitigate the information asymmetry problem in two ways: 1) the budget levels may be determined more correctly because superiors receive local information which will lead to better measurements of performance; and 2) superior may be able to develop better strategies which can be in turn conveyed to the subordinates. Two empirical studies ( Shield & Shields, 1998; and Shields & Young, 1993) report that information asymmetry creates the need for budgetary participation. Based on a questionnaire survey administered to 98 corporate controllers of the Standard and Poors 500 companies, Shields & Young (1993) found that there is a positive association between the extent of information asymmetry and the use of participative budgeting. Shields & Shields (1998) conducted a survey among 60 managers who were graduates of an executive MBA program. They found that the need to share information is positively and significantly related to managers reason for participating in the budgeting process. Previous discussions indicate that information asymmetry is an important determinant of the need for budgetary participation. The information sharing that is facilitated by budgetary participation allows superiors to gain access to subordinates private information, which in turn helps them to develop better strategies for achieving the budgets (Murray, 1990) and to provide subordinates with adequate resources (Nouri & Parker, 1996). For subordinates, budgetary participation might provide an opportunity to communicate perceptions of business opportunities and risks, to negotiate more reasonable budgets, and to ensure that the budget is aligned with their personal aspirations. Therefore, the higher the information asymmetry between

superiors and subordinates, the greater the need for budgetary participation. Specifically the following hypothesis will be tested: H1: There will be a positive relationship between information asymmetry and level of budgetary participation. Mediating variables There is an abundance of research on the impacts of budgetary participation on performance in management, organizational behavior and accounting literature. Nonetheless, these previous studies have reported inconclusive results2. As a result, more recent studies on budgetary participation have considered factors which would make participation more or less successful (Jermias & Setiawan, 2008; Leach-Lopez et al, 2007; Parker & Kyj, 2006; Chong et al, 2006; Chong & Chong, 2002). Chenhall & Brownell (1988) propose that researchers consider the circumstances in which participation might or might not work. In a similar vein, Hopwood (1976) emphasizes the need to identify the conditional factors that determine the usefulness of the budgetary participation program, especially since situational variables might improve or impede its effectiveness Recent studies have documented that the direct effects of budgetary participation on job satisfaction/performance may be influenced by various mediating variables (e.g., Chong et al., 2006; Wentzel, 2002). Consistent with these recent studies, we argue that the participation-job satisfaction/performance relationships are not direct and propose that goal commitment and role ambiguity mediate these relationships. . Goal Commitment

Please consult Brown et al, (2009); Shield & Young (1993) and Locke & Schweiger (1979) for an extensive review of studies on budgetary participation.

Goal commitment is the determination to pursue a goal and an unwillingness to abandon it or lower its standard (Hollenbeck & Klein, 1987). Klein et al. (2001) argue that goal commitment is a critical aspect of the relationship between budget and performance because a budget can have no motivational effect if employees have no commitment to the goals for which it they are held accountable. Locke (1968) proposes that employees behavior is influenced by their conscious ideas and intentions. Locke & Latham (1990) argue that subordinates will only consider putting effort into a task if they perceive that the budget is achievable and worth the effort. Accordingly, it is desirable to include subordinates in the budget setting process because it will enable them to negotiate and eventually agree on the budget. Allowing subordinates to have some control over the budget will also lead them to perceive that their superiors trust them. This may in turn increase the level of subordinates ego- involvement in company goals, acceptance of the goals, and commitment to achieving them (Locke, 1968). Locke (1968) contends that the most direct effect of participation is subordinates commitment to the decisions which have been reached. Locke & Latham (1990) argue that participation will lead subordinates to accept the goals as r personal objectives. In a similar vein, Hofstede (1991) asserts that participation increases commitment to a goal because subordinates internalize the goals through the process of information sharing which occurs during the goal setting process. Previous discussions indicate that the impact of budgetary participation on job satisfaction and performance is mediated by goal commitment. Murray (1990) argues that budgetary participation will have a positive impact on goal commitment and result in better outcomes. If subordinates are committed to the budgets they tend to be more

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satisfied with their job and to put more effort into attaining the budget. Hence, the following hypothesis will be tested: H2a: The relationship between budgetary participation and job satisfaction will be mediated by goal commitment such that budget participation increases goal commitment, leading to higher job satisfaction. H2b: The relationship between budgetary participation and performance will be mediated by goal commitment such that budget participation increases goal commitment, leading to higher performance. Role Ambiguity Chenhall & Brownell (1988) argue that there is no theoretical argument which can support the claims that budgetary participation has a direct effect on job satisfaction or performance. Instead, they contend that the effect of budgetary participation on performance is mediated by other variables such as role ambiguity. Role ambiguity refers to a lack of clear understanding about the actions one is required in order to perform ones job correctly and efficiently (Kahn et al., 1964). Kahn et al. (1964) propose that role ambiguity may include: 1) what tasks are expected to be performed; 2) how the tasks are to be performed; 3) how the performance will be evaluated, and 4) the consequences of completing or not completing the tasks. Previous studies have hypothesized that role ambiguity is detrimental to individuals as well as to organizations. The negative consequences of role ambiguity have been documented in a number of settings and the studies have consistently reported the negative impact of role ambiguity on job satisfaction/performance (Wu & Norman, 2006; Chong et al., 2006; Chong, 2002; Fischer, 2001; Chenhall & Brownell, 1988). Rizzo et al. (1970) contend that high role ambiguity causes lower productivity,

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more tension, dissatisfaction, and psychological withdrawal. Fischer (2001) administered a questionnaire survey to 169 auditors and found that role ambiguity was negatively associated with their job satisfaction and performance. Chenhall & Brownell (1988) investigated the intervening effects of role ambiguity on the budgetary participation-job satisfaction/performance relationship by administering a questionnaire survey to 36 middle-level managers from a large manufacturing company. They report that role ambiguity has a significant negative effect on both job satisfaction and performance. We argue that role ambiguity will mediate the effect of budgetary participation and job satisfaction/performance. Subordinates participation in the budgeting process may clarify their understanding of the tasks they are expected to perform, how to perform those tasks, how their performance will be evaluated, and the consequences of meeting or not meeting superiors expectations. Chenhall & Brownell (1988) propose that the indirect impact of budgetary participation on performance is operated initially from the capacity of budgetary participation to reduce role ambiguity. They predict and find that decreased role ambiguity improve job satisfaction and performance. In accord with Chenhall & Brownell (1988), we test the following hypothesis: H3a: The relationship between budgetary participation and job satisfaction will be mediated by role ambiguity such that budget participation decreases role ambiguity, leading to higher job satisfaction. H3b: The relationship between budgetary participation and performance will be mediated by role ambiguity such that budget participation decreases role ambiguity, leading to higher performance. 3. Research Method

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Sample A survey questionnaire was used to collect data from firms in the Metropolitan Istanbul area. These firms operate in various sectors, including road construction, mineral water filling, sea transportation, and car park management. Most of the firms are the biggest in their respective sector because the routinely get contracts with the municipalities which permit them to provide services to the public. However, these companies do not have the monopoly rights and face competition in their sector. We chose these firms because they possessed unique characteristics. That is, they are legally private companies which compete with other private firms, but they operate like a government unit and are governed and heavily influenced by the municipality. It is therefore interesting to investigate whether previous studies findings with regard to the impact of budgetary participation on various outcomes can be applied to this different context. We contacted the accounting managers of each firm to ascertain their willingness to participate in our study and to gain access to those of their subordinates who were responsible for setting and executing the budgets. Subsequent to this initial contact, we identified 246 respondents and sent them the following materials: a letter explaining the purpose of the study, the questionnaire, and a self-addressed, stamped envelope. We received 204 responses, which represented an 83 % response rate. Ten responses were excluded from further analyses because they were incomplete, so our final sample consists of 194 responses. Variable measurement This study used six variables to test the hypotheses presented in the previous section. The instrument has been used extensively in previous studies in various settings

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and demonstrated an acceptable level of construct validity and reliability (e.g., Kren, 1992; Dunk, 1993; Wentzel, 2002; Wu & Norman, 2006; Leach-Lopez et al, 2007; Brownell, 1982). An abbreviated version of the questionnaire used in this study is presented in Appendix A. Information asymmetry was measured using the six-item scale developed by Dunk (1993). He contends that the six items in the instrument are based on the definition of information asymmetry prescribed by agency theory and detailed in the literature Participants were asked to distinguish between the information possessed by superiors and subordinates. The response scales extended from (1) my superior has much better information to (5) I have much better information. The extent of participative budgeting was measured using an instrument first developed by Vroom & Mann (1960) which has been modified by subsequent and previous studies (e.g., Brownell, 1982; Parker & Kyj, 2006; Milani, 1975; Merchant, 1985; Jermias & Setiawan, 2008). Respondents were asked about their degree of influence on preparing and executing their budgets. The response scales ranged from (1) strongly disagree to (5) strongly agree. Goal commitment was measured using three questions originally developed by Locke (1968) that has been modified by prior research (e.g.,Wentzel, 2002; Maiga, 2005, Chong & Johnson, 2007; Murray, 1990). Respondents were asked to indicate their level of commitment to the agreed- upon goals. The response scales ranged from (1) not at all to (5) very much. We use the instrument developed by Rizzo et al. (1970) to measure role ambiguity. It is one of the most widely use instruments for the measurement of role ambiguity (Chenhall & Brownell, 1988; Chong, 2002; Chong et al., 2006; Wu &

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Norman, 2006; Fischer, 2001). Respondents were asked about their clarity regarding their role in terms of what was expected from them, how they were going to achieve their goals, how much authority they had, and the level of their responsibility. The response scales ranged from (1) always to (5) never. Job satisfaction is defined as the feelings workers have about their job or job experiences in relation to previous experiences, current expectations, and available alternatives (Baizer et al., 1997). The degree of job satisfaction was assessed using an instrument developed by Weiss et al. (1967), which has been used by previous research in accounting literature (e.g., Leach-Lopez et al., 2007; Chong et al., 2006; Lau & Tan, 2003; Murray, 1990; Brownell, 1982; Chenhall, 1986; Chenhall & Brownell, 1988). Respondents were asked to indicate their level of satisfaction with their job on scales ranging from (1) very dissatisfied to (5) very satisfied. Performance was assessed using the self-assessment scale originally developed by Mahoney et al. (1965), which has been adapted by previous accounting studies (e.g., Kren, 1992; Brownell, 1982; Brownell & Hirst, 1986; Brownell & McInnes, 1986; Parker & Kyj, 2006; Jermias & Setiawan, 2008). The performance indicators consist of nine items. Respondents were asked to indicate their level of achievement on one measure of overall performance and eight measures of specific performance dimensions. The response scales ranged from (1) extremely below average to (5) extremely above average. 4. Data Analysis and Result Construct validation We begin our analyses by assessing the reliability of the constructs used in this study. The six constructs and their inter-item reliability are shown in Table 1. The

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results indicate that the reliability of the constructs is within the acceptable range (Nunnally, 1967), with a minimum of 0.801 and a maximum of 0.924 [Insert Table 1 here] We perform a principal component factor analysis to investigate whether the multi-item questionnaire has dimensions that are consistent with the proposed construct in this study. 3. As shown in Table 2, information asymmetry has one factor (58.594 % of the variance explained); participative budgeting has one factor (73.670 of the variance explained); goal commitment has one factor (75.554 % of the variance explained); role ambiguity has one factor (50.650 of the variance explained); job satisfaction has one factor (44.030 of the variance explained); and performance has one factor (51.263 of the variance explained). These results confirm that the questionnaires used in this study can be categorized according to the proposed construct. [Insert Table 2 here] Descriptive statistics and correlations Table 3 presents the descriptive statistics of the variables used in this study. The mean response for information asymmetry is 3.356 with a minimum of 1.00 and a maximum of 5.00. Participative budgeting has an average of 3.714 with a minimum of 1.00 and a maximum of 5.00. For goal commitment, the mean response is 4.129 with a minimum of 1.00 and a maximum of 5.00. For role ambiguity, the mean response is 1.819 with a minimum of 1.00 and a maximum of 3.670. For job satisfaction, the mean response is 3.804 with a minimum of 1.210 and a maximum of 5.00. In terms of performance, the mean response was 3.827 with a minimum of 1.250 and a maximum of 4.880.
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To obtain a clear pattern of loadings, we use Varimax with Kaiser Normalization rotation method. In applying this procedure, factors with Eigen values greater than 1.00 were retained.

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[Insert Table 3 here] Table 4 presents the Pearson correlations for all the variables used in this study. The results indicate that participative budgeting is positive and significantly correlated with goal commitment, but negatively and significantly correlated with role ambiguity. Goal commitment is significantly and positively correlated with both job satisfaction and performance, but negatively and significantly correlated with role ambiguity. Role ambiguity is negative and significantly correlated with both job satisfaction and performance. The two outcome variables are positive and significantly correlated. These results provide early support for the hypotheses developed for this study. [Insert Table 4 here] Hypothesis testing We use the structural equation modeling approach to examine the hypotheses presented in section two. Leach-Lopez et al. (2007) argue that this approach is superior to the multiple regression method because of its ability to capture the subtleties of a phenomenon wherein the correlation between the independent variables and the dependent variable is mediated by one or more intervening variables. Tables 5 and 6 present the coefficients of the structural model with job satisfaction and performance as the respective dependent variables. The structural model appeared to be a reasonable fit for our study (i.e., X2/df = 1.48; CFI = 0.901; IFI = 0.903; RMSEA = 0.05 for performance as the dependent variable and X2/df = 1.53; CFI = 0.917; IFI = 0.918; RMSEA = 0.05 for job satisfaction as the dependent variable)4.

Researchers have provided some guidelines in assessing the potential biases inherent in various measures when using the structural equation modeling approach. Wheaton et al, (1977) suggest that the chi-squared divided by degree-of-freedom (X2/df) should be lower than 3.00, while Steiger (1990) contends that the residual mean square approximation (RMSEA) should be less than 0.10. Bentler &

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Hypothesis H1 predicts that information asymmetry will be positively associated with budgetary participation. Panel A of both Table 5 and Table 6 indicate that the path coefficient between information asymmetry and budgetary participation (Path A) is positive but not significant. This result does not support Hypothesis H1. Panel B of Table 5 presents the non-hypothesized path coefficients using job satisfaction as the dependent variable. The results indicate that: 1) Path B (budgetary participation job satisfaction) is positive and significant (= 0.134, t = 1.654, p < goal commitment) is positive and role

0.05); 2) Path C (budgetary participation

significant (= 0.400, t = 5.323, p < 0.001); Path D (budgetary participation

ambiguity) is negative and significant (= -0.258, t = -3.246, p < 0.001); Path E (goal commitment job satisfaction) is positive but not significant (= 0.059, t = 0.709, p = job satisfaction) is negative and significant (= -

0.240); and Path F (role ambiguity 0.334, t = -4.247, p < 0.001)

Panel B of Table 6 presents the non-hypothesized path coefficients using performance as the dependent variable. The results indicate that: 1) Path B (budgetary participation performance) is positive but not significant (= 0.028, t = 0.334, p = goal commitment) is positive and role

0.369); 2) Path C (budgetary participation

significant (= 0.400, t = 5.323, p < 0.001); Path D (budgetary participation

ambiguity is negative and significant (= -0.258, t = -3.246, p < 0.001); Path E (goal commitment performance) is positive and significant (= 0.157, t = 1.810, p < 0.05); performance) is negative and significant (= -0.184, t = -

and Path F (role ambiguity 2.228, p < 0.05).

Bonnet (1980) indicate that the comparative fit index (CFI) and the Bollens fit index (IFI) should be greater than 0.90.

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Hypothesis H2a expects that goal commitment will mediate the relationship between budgetary participation and job satisfaction such that budgetary participation increases goal commitment, which in turn leads to higher job satisfaction. To test this hypothesis we calculate the indirect relationship between budgetary participation and job satisfaction running through goal commitment. The results of this test are presented in Panel C of table 5. They indicate that the indirect effect of budgetary participation on job satisfaction running through goal commitment (path budgetary participation commitment goal

job satisfaction) is positive but not statistically significant (= 0.024, z

= 0.754, p = 0.453)5. This result does not support hypothesis H2a. Hypothesis H2b expects that goal commitment will mediate the relationship between budgetary participation and performance such that budgetary participation increases goal commitment, leading to higher performance. To test this hypothesis, we calculate the indirect relationship between budgetary participation and performance running through goal commitment. Panel C of Table 6 presents the results of this procedure. The results indicate that goal commitment mediates the relationship between budgetary participation and performance (path budgetary participation commitment goal

performance), which is positive and statistically significant (= 0.063, z

= 2.093, p < 0.05). This result supports hypothesis H2b. Hypothesis H3a anticipates that role ambiguity will mediate the relationship between budgetary participation and job satisfaction such that budgetary participation decreases role ambiguity, leading to higher job satisfaction. To test this hypothesis, we
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The path coefficient for the mediating effect is calculated by multiplying the standardized path coefficient of each path involved. The Z-score is calculated using the following formula suggested by Preacher et al. (2007) and Sobel (1982):

Z=

ab b s a + a 2 sb
2 2 2

, where a and b are the standardized

path coefficients of path a and path b respectively, sa and sb are the standard error of a and b respectively.

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calculate the indirect relationship between budgetary participation and job satisfaction running through role ambiguity. Panel C of Table 5 shows the results of this procedure. The results indicate that role ambiguity mediates the relationship between budgetary participation and job satisfaction (path budgetary participation role ambiguity job

satisfaction), which is positive and statistically significant (= 0.086, z = 3.096, p < 0.01). This result supports hypothesis H3a. Hypothesis H3b anticipates that role ambiguity will mediate the relationship between budgetary participation and performance such that budgetary participation decreases role ambiguity, leading to higher performance. To test this hypothesis, we calculate the indirect relationship between budgetary participation and performance running through role ambiguity. Panel C of Table 6 shows the results of this procedure. The results indicate that role ambiguity mediates the relationship between budgetary participation and performance (path budgetary participation role ambiguity

performance), which is positive and statistically significant, = 0.047, z = 2.374, p < 0.05). This result supports hypothesis H3b. [Insert Table 5 here] [Insert Table 6 here] 5. Discussions, Limitations, and Implications for Future Research Budgetary participation and its impact on job satisfaction and performance has been the subject of extensive research in management and accounting literature. Despite this volume, the empirical findings of this body of research have been inconclusive. This may in part be due to the incomplete model which the previous studies have employed (Shields & Young, 1993).

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Following Shields & Youngs (1993) suggestion, we use a comprehensive model to investigate the impacts of budgetary participation on job satisfaction and performance by including an antecedent variable (information asymmetry) and two mediating variables (goal commitment and role ambiguity). The studys key findings are that goal commitment and role ambiguity mediate the relationship between budgetary participation and job satisfaction, as well as the relationship between budgetary participation and performance. The significant indirect effect of budgetary participation on job satisfaction and performance running through role ambiguity is consistent with the result reported by Chenhall and Brownell (1988). Furthermore, the results indicate that goal commitment mediates the relationship between budgetary participation and performance. However, the mediating effect of goal commitment on the relationship between budgetary participation and performance is not statistically significant. Overall, these results suggest that increased goal commitment causes managers to work harder, leading to better performance. However, increased goal commitment does not necessarily make managers more satisfied with their job. It is interesting to note that our results indicate that the direct effect of budgetary participation on performance is not significant when goal commitment and role ambiguity are mediating variables but the indirect effects of budgetary participation on performance running through goal commitment and role ambiguity are positive and significant. These results suggest that the main benefits of budgetary participation are an increase in managers commitment to their goals and a decrease in role ambiguity. In other words, when managers are committed to their goals and have a clear understanding of the role they are expected to perform, they will perform better.

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The results of this study should be interpreted in light of two limitations. First, we use a questionnaire survey to collect data from our respondents. We acknowledge that responses to questionnaire survey might be biased toward socially desirable responses. Kren (1992), however, argues that even if respondents provide responses that appear to be more positive than those generated by more objective measurements, there is no reason to believe that their bias would systematically affect the relationship between the independent and dependent variables. In addition, the use of questionnaire survey enables us to explore a rich amount of data that is not typically available in the public domain. Future research might examine the robustness of our model by using publicly available data Second, this study was conducted among managers of semi-private companies in a developing country (Turkey). The social and environmental characteristics of our research setting might therefore be different from other settings. Semi-private companies tend to be significantly influenced by governments in terms of budget formulation and implementation. This might be the reason why we did not find a significant relationship between information asymmetry and budgetary participation and why budgetary participation has an indirect effect on job satisfaction running through goal commitment. This setting, however, provide us with useful insights with regard to the impact of budgetary participation on job satisfaction and performance in a more controlled environment. In spite of the limitations mentioned above, this study will be beneficial for companies in general and for organizations in developing countries in particular. It will help the latter to realize that budgetary participation alone does not improve job satisfaction and performance. Rather, it is the increased commitment and decreased role

22

ambiguity which results from managers participation in the budgetary process that improves job satisfaction and performance.

23

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Table 1 Inter-item construct reliability Constructs Information Asymmetry Participative Budgeting Goal Commitment Role Ambiguity Job Satisfaction Performance

Cronbach Alpha 0.858 0.878 0.835 0.801 0.924 0.851

Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965).

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Table 2 Results of factor analyses on strategy, control systems and performance Factor Eigen value Percent of variance explained Information Asymmetry 3.516 58.594 Participative Budgeting 2.947 73.670 Goal Commitment 2.267 75.554 Role Ambiguity 3.039 50.650 Job Satisfaction 8.366 44.030 Performance 4.101 51.263
Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965).

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Table 3: Pearson Correlations among Variables (n=194) (P-values in Parenthesis)

Variable

Information Asymmetry Participative Budgeting Goal Commitment Role Ambiguity Job Satisfaction Performance

Information Asymmetry 1 0.091 (0.205) -0.037 (0.604) 0.071 (0.324) -0.170** (0.018) 0.125* (0.083)

Participative Budgeting

Goal Commitment

Role Ambiguity

Job Satisfaction

Performance

1 0.358*** (0.000) -0.228*** (0.001) 0.229 (0.001) 0.135 (0.000) 1 -0.410*** (0.000) 0.282*** (0.000) 0.237*** (0.001) 1 -0.446*** (0.000) -0.246*** (0.001) 1 0.291*** (0.000) 1

Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965). *,**, and *** denote the significant level of 0.10. 0.05 and 0.01 respectively based on two-tailed tests. .

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Variable Information Asymmetry Participative Budgeting Goal Commitment Role Ambiguity Job Satisfaction Performance

Mean 3.356 3.714 4.129 1.819 3.804 3.827

Table 4: Descriptive Statistics Standard Deviation Minimum 0.195 1.000 0.970 0.672 0.524 0.602 0.576 1.000 1.670 1.000 1.210 1.250

Maximum 5.000 5.000 5.000 3.670 5.000 4.880

Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965).

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Table 5 Structural Model Path Coefficients with Job Satisfaction as the Dependent Variable Path Standardized Path t-value (p-value) Coefficient Panel A: H1: Direct effect: Path A: Information Asymmetry 0.094 1.118 Budgetary Participation (ns) Panel B: Non-hypothesized path Path B: Budgetary Participation Job Satisfaction Path C: Budgetary Participation Goal Commitment Path D: Budgetary Participation Role Ambiguity Path E: Goal Commitment Job Satisfaction Path F: Role Ambiguity Job Satisfaction Path Panel C: H2a: Mediating effect Budgetary Participation Goal Commitment Job Satisfaction H3a: Mediating effect Budgetary Participation Role Ambiguity Job Satisfaction 0.117 1.091 (ns) 5.231 (<0.001) -2.417 (0.001) 1.298 (0.079) -3.756 (<0.001) Z-value (p-value)2)

0.383*** -0.228*** 0.097* -0.422***

Standardized Path Coefficient1) 0.037

1.120 (ns) 3.569 (<0.001)

0.096***

Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965). *, **, and *** denote significant levels based on one-sided tests. Fit indices: X2/df = 3.105; GFI = 0.941; NFI = 0.947; RMSEA = 0.178. 1) The path coefficient for the mediating effect is calculated by multiplying the standardized path coefficient of each path involved 2) The Z-score is calculated using the following formula suggested by Preacher et al. (2007) and Sobel, (1982):

Z=

ab b s a + a sb
2 2 2 2

, where a and b are the standardized path coefficients of path a and

path b respectively, sa and sb are the standard error of a and b respectively.

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Table 6 Structural Model Path Coefficients with Performance as the Dependent Variable Path Panel A: H1: Direct effect Path A: Information Asymmetry Budgetary Participation Panel B: Non-hypothesized path Path B: Budgetary Participation Performance Path C: Budgetary Participation Goal Commitment Path D: Budgetary Participation Role Ambiguity Path E: Goal Commitment Performance Path F: Role Ambiguity Performance Path Panel C: H2b: Mediating effect Budgetary Participation Goal Commitment Performance H3b: Mediating effect Budgetary Participation Role Ambiguity Performance Standardized Path Coefficient 0.097 t-value (p-value) 1.157 (ns) 0.478 (ns) 5.249 (0.000) -2.424 (<0.001) -1.970 (0.021) -2.171 (0.018) Z-value (p-value)2)

0.044

0.383*** -0.228*** 0.178** -0.189**

Standardized Path Coefficient1) 0.068***

5.305 (<0.001) 2.389 (<0.05)

0.043**

Information Asymmetry is measured as the sum of the six-item scale developed by Dunk (1993). Participative Budgeting is measured as the sum of the four-item scale developed by Vroom & Mann (1960); Goal Commitment is measured by the sum of the three-item scale developed by Latham & Steele (1983); Role Ambiguity is measured as the sum of the six-item scale developed by Rizzo et al. (1970); Job Satisfaction is measured by the sum of the twenty-item scale of Minnesota Satisfaction Questionnaires developed by Weiss et al. (1967); and Performance is measured using the nine-item scale developed by Mahoney et al. (1965).

*, **, and *** denote significant levels based on one-sided tests. Fit indices: X2/df = 3.753; GFI = 0.944; NFI = 0.963; RMSEA = 0.173.
3) The path coefficient for the mediating effect is calculated by multiplying the standardized path coefficient of each path involved 4) The Z-score is calculated using the following formula suggested by Preacher et al. (2007) and Sobel, (1982):

Z=

ab b 2 s a + a 2 sb
2 2

, where a and b are the standardized path coefficients of path a and

path b respectively, sa and sb are the standard error of a and b respectively.

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Figure 1: A Framework Linking Budgetary Participation to Its Antecedents, Mediating, and Outcome Variables

Antecedent Variable

Budgetary Participation

Mediating Variable

Outcome Variable

Goal Commitment

C
Information Asymmetry Participative Budgeting

E
Job Satisfaction/ Performance

F D
Role Ambiguity

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Figure 2: Structural Path Coefficients of Linking Budgetary Participation to Information Asymmetry, Goal Commitment, Role Ambiguity and Job Satisfaction

Antecedent Antecedent Variable Variable

Budgetary Participation

Mediating Variable

Outcome Variable

Goal Commitment

0.383*** (5.231) C
Information Asymmetry

0.097 (1.298) E 0.117 (1.091) B

Job Satisfaction

0.094 (1.118) A

Participative Budgeting

F -0.228*** (-2.417) D
Role Ambiguity

-0.422*** (3.756)

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Figure 3: Structural Path Coefficients of Linking Budgetary Participation to Information Asymmetry, Goal Commitment, Role Ambiguity and Performance

Antecedent Variable

Budgetary Participation

Mediating Variable

Outcome Variable

Goal Commitment

0.383*** (5.249) C
Information Asymmetry

0.178** (1.970) E 0.044 (0.478) B

Performance

0.097 (1.157) A

Participative Budgeting

F -0.228*** (-2.424) D
Role Ambiguity

-0.189** (-2.171)

40