BUDGETARY PARTICIPATION AND PROCEDURAL JUSTICE: EVIDENCE FROM STRETCH BUDGET CONDITION

This study examines the role of group value element of procedural fairness in explaining how individuals take into account fairness conditions in making judgment regarding budgeting process. Furthermore, the study extends prior research in procedural fairness by observing the individual behavior in a stretch budget condition. College students serve as subjects in an experiment. Manipulations of control and group value are randomly assigned to the participants. Two dependent variables, procedural justice judgments and budget commitment, are measured. The results show that supplying subordinates with information regarding group value enhances procedural justice judgments and budget commitment. Using a stretch budget condition, the study shows that procedural justice has a mediating effect in the relations between group value and budget commitment. Moreover, the study finds that in the stretch budget condition, group value has a negative relation with budget commitment, suggesting that budgetary participation creates a behavioral problem. The study provides empirical evidence that group value along with control element of procedural fairness improve procedural justice judgments to the level beyond that produced by each variable alone. The inclusion of group value judgments fills the gap that previous budgetary participation research produces.