The effect of trust-in-superior and truthfulness on budgetary slack: An experimental investigation

This chapter examines the effect an informal control namely trust-in-superior and subordinates’ truthfulness in revealing their private information on budgetary slack. A laboratory experiment was conducted. A one-way analysis of variance (ANOVA) and ordinary least squares (OLS) regression were used to test the hypotheses proposed in this chapter. The independent variables were trust-in-superior and subordinates’ truthfulness in revealing their private information. The dependent variable was budgetary slack. The results indicate that trust-in-superior reduces the budgetary slack created by subordinates under private information condition. In addition, the results show that subordinates’ truthfulness in revealing their private information mediates the effect of trust-in-superior on budgetary slack.