Budgetary participation and performance: some Malaysian evidence

• Main Authors: Yahya, Mohd Nor Yahya, Nik Ahmad, Nik Nazli, Fatima, Abdul Hamid
• Format: Article
• Language: English
• Published: Emerald 2008
• Subjects: H Social Sciences (General); HC Economic History and Conditions
• Online Access: http://irep.iium.edu.my/432/1/Budgetary_participation%5B1%5D.pdf; http://irep.iium.edu.my/432/; http://www.emeraldinsight.com/0951-3558.htm

Purpose – The purpose of this paper is to explore the budgetary participation and performance (BPP) relationship in a public sector organization in a developing country, Malaysia. It also attempts to examine whether organizational commitment and perception of innovation mediate the BPP relationship. Design/methodology/approach – A total of 111 budget managers in the Ministry of Defence, Malaysia, participated in the survey. Response rate was 74 per cent. A path analysis was utilised to examine the direct and indirect effects of budgetary participation on managerial performance. Findings – Budgetary participation affects managerial performance via the mediating variable of organizational commitment but not perception of innovation. There is a direct relationship between budgetary participation, managerial performance, organizational commitment and perception of innovation. Research limitations/implications – This is a study conducted in the Malaysian Ministry of Defence (MINDEF), thus results may not be generalizable to other organizations. It involves only two intervening variables; organizational commitment and perception of innovation and uses the intervening variable model to explain the budgetary participation and performance relationship. Budgetary participation improves managerial performance in MINDEF in two ways; directly, as a consequence of management involvement in the budgetary process, as well as indirectly, when managers’ commitment to the organization increases due to their participation and involvement in the budgetary process. Originality/value – This paper fills a gap in the literature as very few studies have examined budgetary participation in a developing country and in a public sector organization.