The Industrial Relations and Budgeting Interface: An Empirical Study

While previous contingency accounting studies conceived external environmental factors as affecting budgeting in terms of markets, technology, or task uncertainty, industrial relations environment has been rarely considered as an important influential factor in accounting research. Nonetheless, industrial relations activities - work stoppages, union officials' actions and conflicts between unions - could be expected to play a significant role in an organisation's management control systems and performance. This study sought to search for a contingent relationship between industrial relations and two important elements of an organization's management control systems - budgetary participation and budget use in performance evaluation. Through a detailed analysis of a sample of 55 Australian coal miners, we examine the moderating role of budgetary participation in the relationship between industrial relations and budget use. The hypothesis in this study postulates managers' use of budgets in performance evaluation being affected by a two-way interaction between industrial relations and budgetary participation. We found that industrial relations environment influences the extent of budget use in performance evaluation, but the magnitudes of this influence depends on levels of managers' participation in setting their organization's budgets.