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International Journal of Applied Finance and Business Studies, Vol.1. No.1, (2013) 28–38, ISSN: 2338-3631

The Influence of Participation in Budgeting on Budgetary Slack with

Information Asymmetry as a Moderating Variable and Its Impact on the
Managerial Performance (A Study on Yayasan Pendidikan dan Koperasi in the
Province of Banten, Indonesia)
Karsam*
Student of Accounting Doctoral Program, Postgraduate Study, University of Padjadjaran Bandung, Indonesia

Keywords: Abstract: There are budgetary slack in the budgeting of Yayasan Pendidikan dan
Koperasi in the Province of Banten. The case was allegedly due to the information
Participatory budgeting asymmetry between the employer (the owner) and subordinate (manager) and the
presence of adverse selection, where the managers and other insiders know more
Information Asymmetry about agency prospects, and also because of the moral hazard in managers who
acted without the knowledge of the shareholders or owners of the company. Using
Managerial Performance
path analysis with partial least square (PLS), the answer of 93 people who are
drafting teams in the budget of each organization as respondents through
questionnaires. Results of data analysis show that the level of information
asymmetry in the correlation between participatory budgeting with budgetary slack
is 24%, the remaining 76% are other variables that are not described in this study.
To improve the effectiveness of the budget, the management should devolve
authority, evaluate and ensure that the budget drafting team have considered
thoroughly information asymmetry, as well as managerial performance measured in
determining planning and budgeting.

© 2013 Trigin Publisher. All rights reserved.

1. INTRODUCTION
According to Yuhertiana [1], in a very strong paternal culture of government, an officer will be looking for ways to
"give something" to the subordinates. One way that can be done is to submit an excessive budget. In the behavioral
theory of the budget, this is known as the budgetary slack, i.e. the tendency to behave unproductively by overestimating
cost when an employee filed its budget. So it's not impossible to make fictitious SPJ (Letter of Accountability) and
budget mark-up will be even greater. In the field of accounting, planning stage has been of concern to some
researchers, especially in relation to issues of budgetary slack, and participatory budgeting [2, 3, 4]. Yuhertiana [4]
found that participatory budgeting was still apparent (pseudo). On the other hand, the budgetary slack is still found
quite often. Behavioral issue in the aspects of the ratification of the budget is very common with political nuance.
Conflict of interest between the executive and legislative often happens, a tough stage that causes delays in local
government budget (APBD) approval.
Many local government budgets in Indonesia, whose ratification been delayed, among others are Pemko Tanjung
Pinang (Sinar Harapan, January 31, 2009), Cimahi (www.pikiran-rakyat.com, December 31, 2008), Sumenep
(suarasurabaya.net, January 26, 2009). Even according to the Minister of the Internal Affairs, in 2008, only 22 of the 33
provinces provincial budget completed on time. (Pos Kota, October 29, 2008). Of course this causes disruption delay
ratification of the next budget process is more crucial, which embodies the realization of development programs for the
benefit of the people.
The above phenomenon is a condition that occurs in government agencies, and is also happening in the companies and
other public sector organizations in which the organization is implementing performance assessment based on the
achievement of the budget. Economic globalization is characterized by increasingly intense competition, forcing
managers to be able to improve and maintain performance in order to survive in the competition, so it requires an
evaluative tool subordinate manager which emphasizes on accounting performance measures [5]. Furthermore,

*Corresponding author: [email protected] (Karsam)

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researchers in the field of management accounting suggests that budget emphasis according to Hirst [6], Merchant and
Manzoni [7], in the very emphasis on the operational aspects of accounting performance measures such as budget
targets, in addition to the importance of cost control [8] as performance criteria or managerial performance. These sizes
can be said to be more objective and acceptable logically subordinate of the evaluation tools that put more emphasis on
non-accounting measure, because the size of the non-accounting in practice tend to have difficulty in measurement
because it is too subjective.
According to Dunk [9], the main argument for the agent (subordinate) is trying to create budgetary slack to get
compensation in the future. If the subordinate considers the award as the dependent variable in the budgeting, they will
try to create budgetary slack through the budgetary process [10, 11, 12]. So the budget emphasis in performance
evaluations takes effect in creating budgetary slack [13].
Due to the suppression of the budget by superiors to subordinates, there is a performance evaluation tool based on the
achievement of budget targets, in contrast to the opinion of Baiman and Lewis [13], Rigway [14] more focused on
accounting system that was often a source of information in assessing employee performance. Previously, they are
typically the main source of official information in business organizations. Therefore, employees have reason to be
concerned about the budgetary basis of accounting [14], which gives the appearance of the problem of participation in
the budgeting process. The use of field studies to examine the correlation between budgetary participation and
performance of employees, Brownell and McInnes [15] found a significant correlation, although Kenis [8] and Milani
[16] found it was not significant.
The budget that has been prepared to have a role as a planning and budget performance criteria are used as a control
system for measuring managerial performance [11]. To prevent the impact of functional or dysfunctional, attitudes and
behavior of members of the organization need to be involved in the preparation of budget management at a lower level
[17].
Behavioral accounting research in the field of management accounting is dominated by the two conceptual
underpinnings of the behavioral theory of behavioral organizational and agency theory that are based on economics [18,
19]. Since the 1970s, many studies have raised issues about the motivational aspects in the design of management
accounting. Organizational behavior theory which was widely used in the design of the study was the theory of work
motivation with his supporters. According to Luthans [20], in general there are 3 (three) categories of the labor theory
of motivation: 1) Content Theories, which explains what a person's motivation in work; 2) Process Theories
(Expectancy Theories), which is more focused on the factors that influences the cognitive processes someone to work
as well as 3) Contemporary Theory. Content Theories consist of Maslow's Hierarchy of Need; Herzberg's Two-Factor
Theory and Alderfer's ERG Theory. Process theory is a theory of motivation proposed by Vroom and Porter and
Lawler, whereas Contemporary Theories consist of Equity Theory and Attribution Theory. According to Leslie Kren
[21], of the various theories of motivation, work motivation theory used in the development of the most dominant
behavioral accounting research is Expectancy Theories and Attribution Theories. Besides Expectancy Theories and
Attribution Theories, another motivation theory also widely used in the study is Goal Theory proposed by Edwin A.
Locke [22].
According to Mulyadi [23], organization paradigm as institutions is underlying wealth multiplier system design
planning to enter the competitive business environment. Therefore, the competitive environment requires organizations
to have a strong financial base to enable an organization to survive and grow, the planning system needs to be designed
to leverage the laying focus on the real drivers of financial performance.
In the budgeting process as a nonprofit educational foundation, in determining the budget that will be used as an
assessment of organizational performance and employees are always sticking to the report on the realization of years
ago. The big difference in the realization of the budget last year shows the level of success of participatory budgeting
process.
Several phenomena that occur as the sample is on Yayasan Pendidikan Swasta (Private Educational Foundation) in
Tangerang who have implemented organizational performance assessment based on the budget that are made, the data
retrieved from the years of 2003-2012, showing the budgetary slack. Revenue plan in fiscal year 2003/2004 amounted
to Rp 39,565 million and Rp 40,261 million realization, budgetary slack in revenue here occurred Rp 696 million,
while the cost plan was Rp 32,363 million and the realization was Rp 29,590 million (budgetary slack of Rp 2,773
million). In the year 2004/2005 revenue plan of Rp 43,703 million was realized for USD 46 959 million (no budgetary
slack in revenues), while the cost plan of Rp 36,114 million was realized for Rp 33,010 million (budgetary slack of Rp
3,104 million). In the year of 2005/2006 revenue plan of Rp 55,574 million was realized for Rp 56,363 million
(budgetary slack in revenue of Rp 789 million), while the cost plan of Rp 47,356 million was realized for Rp 41,864
million (budgetary slack of Rp 5,492 million).
In the year of 2006/2007, revenue plan of Rp 65,583 million was realized for 68 211 million (no budgetary slack in
revenues), while the cost plan of Rp 58,059 million realized for Rp 53,885 million (budgetary slack of Rp 4,174
million). In the year of 2007/2008 revenue plan of Rp 75,185 million realized for 75 723 million (budgetary slack in

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revenue of Rp 538 million), while the cost plan of Rp 70,145 million realized for Rp 59,270 million (budgetary slack of
Rp 10 875 million). In the year of 2008/2009 plan revenue of Rp 78 231 million was realized for 78 265 million
(budgetary slack in revenue of Rp 34 million), while the cost plan of Rp 75,934 million was realized for Rp 68,213
million (budgetary slack of Rp 7,721 million). In 2009/2010, revenue plan of Rp 83,663 million was realized for
79,686 million (no budgetary slack in revenues), while the cost plan of Rp 78,857 million was realized for Rp 69,275
million (budgetary slack of Rp 9,582 million). In 2010/2011 revenue plan of Rp 89,277 million was realized for 85 606
million (no budgetary slack in revenues), while the cost plan of Rp 81,171 million was realized for Rp 77,854 million
(budgetary slack of Rp 3,317 million). In 2011/2012 revenue plan of Rp 97,846 million was realized for 99 226 million
(no budgetary slack in revenues), while the cost plan of Rp 104,929 million was realized for Rp 99,860 million
(budgetary slack of Rp 5,069 million).
Based on the background, the underlying problem in this research topic is budgetary slack and its impact on managerial
performance on the Yayasan Pendidikan dan Koperasi in South Tangerang, with an overview at some of the following
aspects, namely: (1) The influence of participation in the budgeting on managerial performance, (2) The influence of
participation in the budgeting on budgetary slack; (3) The influence of budgetary slack on managerial performance, (4)
The influence of information asymmetry on the correlation between participation in the budgeting with budgetary
slack.

2. LITERATURE REVIEW AND METHODOLOGY

2.1 Literature Review
The increase or decrease in budgetary slack depends on the extent of accounting information in the budgeting up to the
owner or top management as a principal. To make the information is not biased or information asymmetry occurs in
accordance with agency theory, the manager of the agency must provide complete and accurate information that is
useful in the budgeting process.

2.1.1 Participation in the Budgeting Process and Managerial Performance

Results of study in the accounting literature related to the participation and performance of a strong positive relation
[24]) until a negative correlation [25]. Locke and Schweiger [26], based on the review of the literature about
organizational behavior, concluded that there was no consistent evidence of a positive effect of participation on
performance.
According to Mahoney et al. [27], managerial performance is the performance of the individual members of the
organization in managerial activities, such as: planning, investigation, coordination, supervision, staffing, negotiation
and representation. Influence of participatory budgeting on managerial performance is a key theme of interest in
management accounting research [28]. In this case, Brownell [29] mentions two reasons, namely: (1) participation is
generally assessed with managerial approaches that can improve the performance of members of the organization, (2)
studies that examine the correlation between participation in the performance, the results are conflicting. According to
Brownell [29], high participation in budgeting process improves managerial performance, because participation here is
to involve all parties who are members of an organization. Involvement of all causes both superiors and subordinates
come to feel responsible for a common goal, so that it aligns with the vision and mission of the organization to achieve
the performance expected by the company, so the hypothesis is developed:
Ha1 = Participation in the budgeting process has a positive and significant impact on Managerial Performance.

2.1.2 Participation in the Budgeting Process and Budgetary Slack

Siegel and Marconi [30] stated that the participation of subordinates in the budgeting had a positive correlation with the
achievement of organizational goals. In accordance with agency theory, subordinates will make an easier target to be
achieved by making targets lower budget on the revenue side, and make submissions higher costs on the cost side. The
difference between the reported budget with the budget in accordance with the best estimate for the company's so-
called budgetary slack.
The results of studies that examined the correlation of participation with budgetary slack still showed conflicting
results. Research conducted by Lowe and Shaw [10], Lukka [28] and Young [31] have been tested empirically that
occurs because of budgetary slack subordinates provide biased information to superiors by reporting higher cost or
lower reported earnings. Meanwhile, according to Camman [32], Dunk [33], Merchant [24], and Onsi [34], the
presence of subordinate participation in the budgeting process would reduce the propensity to create budgetary slack.
The results Onsi [34], Camman [32], Merchant [24] and Dunk [33] showed that participation in budgeting could reduce
budgetary slack. This happens because the subordinate help provide personal information about future prospects so that
budgets are prepared to be more accurate. The research of Lowe and Shaw [10], Young [31] and Lukka [28] in contrast

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to a study conducted by Onsi, Camman, Merchant, and Dunk. Their results indicate that budgetary participation and
budgetary slack has a positive correlation, i.e. the higher the participation the higher the budgetary slack will be.
Accounting researchers found that budgetary slack was influenced by several factors including the subordinate
participation in the preparation of the budget [35]. Studies that examine the correlation of participation in budgetary
slack still showed conflicting results. Young [31] and Merchant [24] had tested empirically that occurs because of
budgetary slack subordinates provide biased information to superiors by reporting higher cost or lower reported
earnings. The results of Young [31] and Merchant [24] pointed out that because of the desire to avoid risk, subordinates
engaged in the preparation of the budget tending to perform budgetary slack. The higher the risk, subordinates who
participated in the preparation of the budget will make budgetary slack.
Findings indicate inconsistencies between the studies by other research, suggests the possibility of other variables that
affect the correlation between budgetary participation and budgetary slack. Ghozali [36] said the possibility of the lack
of unity of research results and their implications on the budget, due to certain factors (situational factors) or better
known as contingency variables. In addition, Govindaradjan [37] states that the difference in the results of these studies
can be completed through a contingency approach. Individuals who are involved in the budgeting process become
much aware of information relating to matters relating to the preparation of the budget, so if the boss (the principal) just
use the budget as a performance assessment of subordinates, so to avoid the risk of a poor assessment of the individuals
involved, then the individual will be representing a budgetary slack to be easily achieved. The hypothesis is developed
as follows:
Ha2 = Participation in the budgeting has a positive and significant impact on budgetary slack.

2.1.3 Budgetary Slack and Managerial Performance

In accordance with Onsi [34] budgetary slack can be made by a person who prepares the budget. This includes persons
involved in the budgeting process and that have favorable information [11], and the subordinate will create budgetary
slack as influenced by desire and self-interest that will facilitate the achievement of budget targets, especially if the
assessment manager is determined based on the achievement of performance budget. This work is done by determining
the income is too low (understated) and the cost is too high (overstated). Slack low budget so it will be difficult to
achieve managerial performance will look bad by the principal, otherwise the high budgetary slack will be easily
achieved by the managers involved in the preparation of the budget, so the managerial performance seems to increase;
thus the hypothesis is developed as follows:
Ha3 = budgetary slack has a negative and significant influence on managerial performance.

2.1.4 Information Asymmetry and the Correlation of Participation in the Budgeting with the Budgetary Slack
Information asymmetry has been selected as a moderator variable in this study. Information Asymmetry means that
subordinates have more information to make decisions in budgeting than their superiors [21], for example in comparing
with their superiors, subordinates may master the more important information, or they better understand the technical
operation in more detail. Similar opinion was also expressed by Dunk [33] who defines information asymmetry as a
situation when subordinates exceeds the information possessed by superiors, including local and personal information.
Dunk [33] examined the influence of information asymmetry on the correlation between participation and budgetary
slack. He stated that the information asymmetry will negatively affect the correlation between participation and
budgetary slack. Furthermore, Shields and Young [18] suggest a number of conditions that are likely onset company
information asymmetry, namely: a very large company has spread geographically, has a diverse product and technology
needed. Welsch et al in Young [18] suggest the presence of budgetary participation of middle managers and lower-level
budgeting process, have beneficial effects in at least two things: First, the process of participation in organizations
reduce information asymmetry, thus allowing management top-level information on environmental issues and
technology, from the lower-level managers who have specialized knowledge; Second, the process of participation can
result in a greater commitment from lower level management to implement the budget plan and meet your budget.
Anthony and Govindarajan [38] state that the condition of information asymmetry appears in agency theory (agency
theory), the principal (owner/boss) who gives authority to the agent (manager/subordinate) to set up company being
owned. Information asymmetry is a condition when the owner/boss does not have enough information about the
performance of agents/subordinates so that the superiors cannot determine the contribution of subordinates to the actual
results of the company. Environmental uncertainty can cause subordinates to the field of technical information beyond
the information possessed by their superiors.
According to Schiff and Lewin [11], for planning purposes, the reported budget should be the same as the expected
performance. However, because the subordinates have better information than the supervisor (there is information
asymmetry), then subordinates take the opportunity of participation budgeting. He gave biased information from their

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personal information, by creating a budget that was relatively easy to achieve, so there was budgetary slack (i.e. budget
report was below expected performance). This is further corroborated by Christensen's study [39] and Pope [40] which
reveal that participation in budgeting, subordinates can hide some of their personal information, which can lead to
budgetary slack. From the point of view of agency theory, the information gap between superiors and subordinates can
lead to gaps in information. The information gap can be reduced by exclusion of managers in decision making. The
present study hypothesized that the greater the degree of information asymmetry, the higher the information gap, the
higher the probability of participation in the preparation of the budget implemented so that budgetary slack is very high,
otherwise the lower level of the information gap, the lower the likelihood of participation in budget formulation,
resulting in very low budgetary slack.
HA4 = Information Asymmetry significantly influences the correlation between participation in budgeting and
budgetary slack.

2.2 Methodology
The present study used a descriptive method of verification with Explanatory Survey approach. Data were collected by
sending questionnaires by email and delivered directly to the manager who led the 200 people in the functional
departments of Yayasan Pendidikan dan Koperasi in Banten, whose most employees were in position of a Senior
Manager, Associate Manager and Executive Manager. Respondents were selected based on the following criteria: (1)
each respondent should have budgetary responsibilities in each business unit, (2) each unit is a center of investment, (3)
each manager must occupy the position for at least two years in the business unit. Questionnaires were distributed three
times with the amount of data that was 200 samples managers both upper-lower level, which had budgetary
responsibility.
The object of this study is to investigate the influence of the correlation of participation in budgeting (participatory
budgeting) with budgetary slack that are moderated by the information asymmetry and its impact on managerial
performance in Yayasan Pendidikan dan Koperasi in the Banten Province. The variables used in this study are
budgetary slack as the dependent variable (Y1) and participation in the budgeting (participatory budgeting) (X 1) and
information asymmetry (X2) as a moderating variable coupled with managerial performance variable (Z 1).

2.2.1 Participation in Budgeting (X1)

In measuring the first independent variable (X1), a questionnaire developed by Milani [16] was used, which had been
also widely used among others by Brownell and Mclnnes [15], Frucot and Shearon [41]. With the exception of Hassel
and Cunningham [42], prior research participation involvement in budgeting [19, 33, 43, 44, 45] used the 6-
dimensional cultivated by Milani [16]. Previous studies, although using different things in measure 6 dimensions based
on the premise that represented one factor. Dimensions which were developed by Milani [16] were: (1) Contributions,
(2) changes, (3) satisfaction, (4) Influence, and (5) Discussion.

2.2.2 Information Asymmetry (X2)

The second independent variable (X2) in this study is information asymmetry in which executive managers have more
accurate information about the responsibilities than the unit supervisor. Dimensions developed by Dunk [33] are: (1)
Superiors Have More Information, (2) Subordinates Have More Information, (3) Superiors and Subordinates Have
Same Information, and according to Robin [46] (4) Perception of Information. This variable was measured using a
questionnaire developed by Dunk [33], because most researchers used this dimension as one of the factors to determine
the information asymmetry. Measurement of these variables consist of 6 (six) questions using a Likert scale of one to
seven.

2.2.3 Budgetary Slack (Y1)

The first dependent variable (Y1) in this study is budgetary slack, that is the condition that occurs due to differences in
the amount of the budget submitted by subordinates with the best estimate of the number of organizations. This
variable was measured using a questionnaire developed by Anthony and Govindaradjan [38]. Measurement of these
variables consist of 6 (six) questions using a Likert scale of one to seven. According to Belkoui [47], the dimensions of
budgetary slack is grouped into 8 categories: (1) Slack Attitude, which is an attitude towards the slack that is explained
by variables that indicate the attitude of the manager to make use of budgetary slack, (2) Slack Manipulation,
manipulative attitude described by variables indicating managers in creating and utilizing budgetary slack, (3) Slack
Institutionalization, the institutional slack explained by variables that make managers tend to reduce budgetary slack,
(4) Detection, the detection of slack explained by variables that indicate and demonstrate superior ability to detect
budgetary slack based on the information received, (5) Attitude toward the top management control system, that is an
attitude toward top management control systems described by variables that showed an authoritarian philosophy in the
budget-making caused by the top management division manager, (6) Attitudes toward the divisional control system,
that is an attitude towards the division of control systems described by the subordinate attitudinal variables, resource
pressures, budgetary autonomy and supervision of the use of the budget. (7) Attitudes towards the budget, that is the

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attitude toward the budget outlined by the variable attitudes toward standard levels, attitudes towards the achievement
of the budget for the relevance of performance appraisal, managers and attitude (positive or negative) of the budgeting
system in general, as a tool for managers. (8) Budget relevancy, that is explained by the variable relevance budget
manager attitudes towards the relevance of operational standards department. In this study, the authors use the
dimensions of Dunk [33] because it is more focused on the ease of budget targets that can be achieved, which uses six
instruments, namely: (1) Budget Standards, (2) Achievement of Budget, (3) Tight Budget, (4 ) Budget Emphasis, (5)
Budget Efficiency, (6) Target Budget.

2.2.4 Managerial Performance (Z1)

The second dependent variable (Z1) in this study is the managerial performance that is a management process designed
to link organizational goals with individual goals such that both individual goals and corporate objectives can be met.
Using an average of 9 dimensions which can be measured by adjusting Mahoney et.al [27] to evaluate managerial
performance with 7 point Likert scale: (1) Planning, (2) Process of Investigation, (3) Coordination, (4) Evaluation, (5)
Supervision, (6) Selection of staff, (7) the negotiation process, (8) Representation. Instruments for measuring
managerial performance variables in this study were self-rating instrument developed by Mahoney et al. [27]. This
measure has been used by the main researcher [29, 33, 48]. Respondents answered their performance using a Likert 7
point scale (1 = below average, 7 = above average). Brownell [15]reported that an independent assessment of the
reliability and validity of the instruments Mahoney has provided evidence to support the ballot measure progress [49,
50].
To answer the research questions of the present study, using Partial Least Square (PLS) first developed by Wold as a
general method for estimating path models using latent constructs with multiple indicators. As stated by Wold in Imam
Ghazali [36], PLS is a powerful method of analysis because it is not based on a lot of assumptions based. Data does not
have the multivariate normal distribution (with scale indicator categories, ordinal, interval, until the ratio can be used
on the same model), the sample does not have to be large. Although PLS can also be used to confirm the theory, but it
can also be used to clarify whether there is any correlation between the latent variables.
Models in this study are in accordance with the framework established researchers can be described as follows:

Figure 1:. Structural Equation Models with Path Analysis.

Specification notation on the model :

ɣ = Gamma, a regression coefficient between the latent variable (construct) exogenous with endogenous latent
variable.
ζ = Zetta , a regression residual error for each endogenous variable that shows the composite error of the model.
φ = Phi, covariance or correlation relationships between the exogenous variables (Independent)
η = Eta, shows endogenous variable (dependent), both latent variables (unobserved) and the observed.
ξ = Xi, suggesting exogenous (independent), both latent variables (unobserved) and the observed.
γ1 = coefficient of correlation between ξ1 (composite exogenous1) and η (composite endogenous)
γ2 = coefficient of correlation between ξ2 (composite exogenous2) and η (composite endogenous)
γ3 = coefficient of correlation between ξ3 (composite exogenous3) and η (composite endogenous)
γ4 = coefficient of correlation between ξ1*ξ3 (composite exogenous1* Exogenous3) with η (composite endogenous)

Tools used to analyze the structural model with path analysis above is the program Smart-PLS (Partial Least Square).
There is a measurement model that is the measurement model composite exogenous variable correlation with
endogenous composite, with the following equation:

η = γ1 ξ1 + γ2 ξ2 + γ3 ξ3 + γ4 ξ1*ξ3 + + γ5 ξ2*ξ3 + ζ (1)

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3. RESULTS AND DISCUSSION

Research data used in this study was primary data obtained using questionnaires that had been sent directly to the
compilers of the budget that was the Chairman of Yayasan Pendidikan dan Koperasi, Chief Operating and Financial
Managers of Yayasan Pendidikan dan Koperasi domicile in Banten Province on December May 5, 2012. Until the
deadline for the return of the date of June 30, 2012, of the 200 questionnaires distributed, 93 questionnaires were
returned and 117 questionnaires were not returned. The rate of return (response rate) obtained was 46.5% while the
remaining 53.5% did not return. The rate of return was relatively low due to the deployment and retrieval of the
questionnaire was done by directly delivered and picked up.
Research data were collected and processed to test the quality of the data in the form of validity and reliability tests.
Validity test was conducted with the help of Smart PLS program shows that the level of AVE (average Variance
Extracted) for each item statement items with a total score of managerial performance variables (Z1), budgetary slack
(Y1), participation in the budgeting (X1), and information asymmetry (X2) is significant at the 0.01 level. Thus it can be
interpreted that any item indicator instrument is valid for budgetary slack. Reliability test in this study used the One
Shot test, meaning that only one measurement and then the results were compared with other questions or in other
words, measuring the correlation between the answers to questions. Reliability test results of the calculations show that
the value of Cronbach Alpha (α) for each variable is greater than 0.60, thus it can be concluded that the instrument
items for each variable were reliable Nunnally in Ghozali [36].
The hypothesis was tested with the help of Smart-PLS in accordance with the model in this study, as follows:

Figure 2: Correlation Model Smart-PLS Output

Table 1: Coefficient of Each Line Relations Variable

mean
original
of Standard T-
sample Note
subsa deviation Statistic
estimate
mples
lv0 (Participatory No Influence
Budgeting) -> lv1 -0.083 -0.049 0.238 0.349
(Budgetary Slack)
lv3 (Information Influence
Asymmetry) -> lv1 -0.940 -0.864 0.404 2.327 significance of
(Budgetary Slack) 5% (>1.96)
lv4 (Interaction between Influence
PA and AI) -> lv1 1.209 1.125 0.548 2.204 significance of
(Budgetary Slack) 5% (>1.96)
lv0 (Partisipasi Anggaran) Influence
-> lv2 (Managerial 0.667 0.658 0.076 8.819 significance of
Performance) 1% (>2.56)
lv1 (Budgetary Slack) -> Influence
lv2 (Managerial -0.097 -0.729 0.092 1.965 significance of
Performance) 5% (>1.96)

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3.1. Influence of Participation in Budgeting (X1) on Managerial Performance (Z1)

Influence of Participation in Budgeting (X1) on Managerial Performance (Z1) has a positive regression coefficient of
0.667. In other words, if the composite showed Influence Participation In Budgeting (X1) is increased by 1 unit,
Managerial Performance (Z1) will increase by 0.667 units to record other variables constant/fixed, and significant
because the value of z-count Influence of Participation In Budgeting (X1) to construct Managerial Performance (Z1) of
8819 is greater than the z-score (z-table) at a rate of 1% significance (or of 2.58.) So that the null hypothesis (H 0) is
rejected or Ha1 is accepted or in other words Participation In Budgeting (X 1) directly influences the Managerial
Performance (Z1). This is consistent with the results of Merchant [7] and Brownell [15] which showed that participation
in budgeting can improve managerial performance, because according to Brownell [15] participation is generally
assessed with managerial approaches that can improve the performance of members of an organization in which
participation high in the preparation of the budget will improve the performance here means that participation means
involving all the parties who are members of an organization. Although results vary by research Cherington and
Cherington [25], but here shows that the involvement of all parties causing both superiors and subordinates come to
feel responsible for a common goal, so that it aligns with the vision and mission of the organization to achieve the
performance expected by the organization.

3.2. Influence of Participation in Budgeting (X1) on Budgetary Slack (Y1)

Influence of Participation in Budgeting (X1) on Budgetary Slack (Y1) has a negative regression coefficient of -0083.
Negative coefficient means that the correlation is reversed. In other words, if the composite showed Influence
Participation In Budgeting (X 1) is increased by 1 unit, Budgetary Slack (Y1) will decrease by 0.083 units with records
of other variables constant/fixed, but is not significant because the value of z-count Influence Participation In
Budgeting (X1) to construct Budgetary Slack (Y1) of 0.349 is smaller than the z-score (z-table) on significance rate of
5% (or by 1.96.) So that the null hypothesis (H 0) cannot be rejected or accepted, and reject Ha (alternative hypothesis)
or in other words Participation In Budgeting (X1) has no direct influence on Budgetary Slack (Y1). This is not in
accordance with the results of the study by Onsi [34]; Camman [32], Merchant [7] and Dunk [33], which suggest that
participation in budgeting can reduce budgetary slack, and with different results Lowe and Shaw [10], Young [31] and
Lukka [28], where the results of their research stated that participation in the preparation of budgets and budgetary
slack has a positive correlation or the increasing participation in the preparation of the budget will increase budgetary
slack according to the alternative hypothesis (Ha2), thus Ha1 is rejected because apparently the result of regression
coefficient is negative but not significant because the z-count smaller than the z-table. This result is likely due to other
variables that affect the correlation of participation in budget formulation with slack budget in accordance with the
opinion of Ghazali [36] and Govindaradjan [37] which stated that there were certain factors (situational factors) or
better known as contingency variables.

3.3 Influence of Budgetary Slack (Y1) on Managerial Performance (Z1)

Influence of Budgetary Slack (Y1) on Managerial Performance (Z1) has a negative regression coefficient of -0097.
Negative coefficient means that the correlation is reversed. In other words, if the composite shows budgetary slack (Y1)
is increased by 1 unit, Managerial Performance (Z1) will decrease by 0.097 units with records of other variables
constant/fixed. Z-value calculated Budgetary Slack (Y1) to construct Managerial Performance (Z1) of 1,965 and greater
than z-score (z-table) with a significance level of 5% or 1.96. This means that reject H 0 and accept Ha3 (alternative
hypothesis), or in other words that the Budgetary Slack (Y 1) directly influences the Managerial Performance (Z1). The
results support the research that has been conducted by Schiff and Lewin [11] that subordinates will create budgetary
slack because it is influenced by the desires and personal interests that will facilitate the achievement of the budget,
especially if the performance appraisal managers (managerial performance) is determined based on the achievement of
the budget, or in other words if the budget is not going making budgetary slack so it will be difficult to achieve
managerial performance will be assessed by the principal look bad, instead of high budgetary slack will be easily
achieved by the managers involved in the preparation of the budget, thus it appears to increase managerial performance.

3.4 Influence of Participation in Budgeting (X1) on Budgetary Slack (Y1) with Information Asymmetry (X2) as
Moderating Variable
Influence of Participation in Budgeting (X1) on Budgetary Slack (Y1) with Information Asymmetry (X2) as a
moderating variable has a regression coefficient of 1,209. A positive influence with a significance level of 5% where
the Z-count shows the number 2,204 and larger Z-table by 1.96. It shows that the influence of positive interaction and
this means that it rejects H0 and accepts Ha4 (alternative hypothesis) where Ha4: Information Asymmetry significantly
affects the correlation of participation in budget formulation with budgetary slack, or in other words that the influence
of participation in the preparation of the budget budgetary slack is reinforced by information asymmetry, with a high

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level of moderation. It is known from the difference in the value of R2 (R Square) of the existing and no moderating
influence of budget emphasis 0:33 (0240-0207) because, according to Ghozali [36] 0:30 ± R2 difference is quite strong.
The results are inconsistent with research Dunk [9], he stated that the information asymmetry will negatively affect the
correlation between participation in budgeting and budgetary slack, but according to the research of Christensen [39],
Pope [40] which revealed that the participatory budgeting, subordinates can hide some of their personal information,
which can lead to budgetary slack.
3.5 Coefficient of Determination

Table 2: Coefficient of Determination

R-square with R-square without

Indicator moderating
moderating

lv0 (Participatory Budgeting)

lv1 (Budgetary Slack) 0.240 0.207
lv2 (Managerial Performance) 0.396 0.396
lv3 (Information Asymmetry)
lv4 (Interaction between PA and AI)

3.6 Budgetary Slack (Y1)

That the construct of Participation in Budgeting (X1) and the Influence of Information Asymmetry (X2) and the
interaction between them (moderating effects) can explain the budgetary slack by 24% or in other words 76% is
explained by other variables that are not included in the study.

3.7 Managerial Performance (Z1)

That the construct of Participation in Budgeting (X1) and the Influence of Information Asymmetry (X2) and the
interaction between them (moderating effects) can explain Managerial Performance by 39.6%, or in other words, 59.4%
is explained by other variables that are not included in the study.

4. CONCLUSIONS AND LIMITATIONS OF STUDY

4.1 Conclusions

Based on the results of research conducted to determine the influence of participation in the budgeting on budgetary
slack with the information asymmetry as moderating variable and its impact on managerial performance, as well as the
discussion that has been described previously, then the inference can be drawn as follows:
(1) Information asymmetry has a significant positive influence on the correlation of participation in the budgeting
with budgetary slack
(2) Participation in the budgeting has a significant positive influence on managerial performance
(3) Budgetary slack has significant negative influence on managerial performance.

4.2 Limitations of Study

This study has several limitations or drawbacks. Limitations in this study are expected to be addressed by subsequent
researchers; (1) the difficulties to control respondents, thus the returned questionnaires are not distributed on time; (2)
perceptions of respondents who submitted in writing to the shape of the questionnaire instrument may affect the
validity of the results; (3) in addition to these limitations, there are many other limitations which are not recognized by
the researcher.

ACKNOWLEDGEMENT
I express my gratitude to Dr. Tettet Fitrijanti, SE., MS., Ak., who guides the author in writing this article of accounting
research.

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