The Moderating Effects of Power Distance on the Budgetary Participation-Performance Relationship
Document Type
Article
Publication Date
1-1-2015
School
Accountancy
Abstract
Purpose: This study extends the budgetary participation-performance/cultural effects literature by isolating and examining the moderating effect of one cultural dimension, power distance, on the budgetary participation-performance relationship. Isolating the impact of power distance is important to this literature because of the fact that participative budgeting remains a possibly underutilized management tool in high power distance countries.
Methodology/Approach: We regroup our multinational sample of managers by power distance level, and employ multigroup structural equation modeling (SEM) and a set of nonparametric bootstrap tests to triangulate our findings.
Findings: We find that the majority of our managers from three high power distance countries (Mexico, Korea, and China) score in the lower half of the power distance scale, that there is significant correlation between participation and performance in both the high and low power distance subsamples, but that the mechanisms connecting participation to performance are quite different. While job satisfaction plays a role in connecting budgetary participation and performance among low power distance managers, job relevant information alone connects budgetary participation and performance among their high power distance counterparts.
Originality/Value: The primary contribution of our work is that we not only demonstrate that budget participation can improve the performance of subordinate managers in high power distance cultures, but also provide evidence of how and why this is plausible. First managers may not share the same high power distance tendencies of their countrymen, and second, the communication aspect of budget participation appears to be more important for increased performance among those with high power distance tendencies.
Publication Title
Advances in Management Accounting
Volume
25
First Page
103
Last Page
148
Recommended Citation
Stammerjohan, W.,
Leach, M.,
Stammerjohan, C.
(2015). The Moderating Effects of Power Distance on the Budgetary Participation-Performance Relationship. Advances in Management Accounting, 25, 103-148.
Available at: https://aquila.usm.edu/fac_pubs/18703