Mitigating Budgetary Slack with Moral Imagination and Clawback Provisions: An Experimental Study

DOI

10.2991/aebmr.k.200606.015How to use a DOI?

Keywords

clawback provisions, budgetary slack, moral imagination, endowment effect

Abstract

This study examines the incentive schemes containing penalties (clawback) to mitigate budgetary slack. This research also examines internal factors, moral imagination, to reduce budgetary slack. This controlled experiment 2x2 between-subjects. Besides that, as a control, this study also uses bonus incentives to determine the significance of slack reduction by subordinates in providing clawback incentives. The results show that subjects in clawback provisions group are made less slack compared to bonus group. Participants consider bonuses in clawback provisions, so they will tend to recalculate to make the slack because they were afraid to get bonus deduction. These results support the endowment effect theory which states subordinates satisfied so they will not be lost their bonus incentive. Besides, subordinates with higher moral imagination make less slack than subordinates with low moral imagination. The practical implication for this research is that organizations require clawback incentives to mitigate unethical behavior such as budgetary slack. Also, it is also necessary to increase the moral imagination of subordinates to create an ethical environment in the organization. The contribution of this study is a clawback study of budgetary slack with research methods that did not exist in previous studies. The study also added a comparative test of moral imagination against budgetary slack.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Ida Ayu Purnama
AU  - Indra Kusumawardhani
PY  - 2020
DA  - 2020/06/09
TI  - Mitigating Budgetary Slack with Moral Imagination and Clawback Provisions: An Experimental Study
BT  - Proceedings of the 23rd Asian Forum of Business Education(AFBE 2019)
PB  - Atlantis Press
SP  - 96
EP  - 100
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.200606.015
DO  - 10.2991/aebmr.k.200606.015
ID  - Purnama2020
ER  -