Management Accounting Section Midyear Meeting

Public Integrity, Monitoring, and Budget Ratcheting in Government Organizations

• In Event: Nonprofit and Government

Abstract

Using data from central government agencies in Korea, we examine the effect of public integrity and monitoring on asymmetric budget ratcheting in government organizations. We find that asymmetric budget ratcheting is more pronounced when agencies have higher level of public service integrity. This finding is consistent with the existence of separating contracts, where superiors allocate more (less) budgets to agents with high (low) public integrity. We also find evidence of a greater degree of asymmetric budget ratcheting when monitoring by superiors is more intense, supporting the notion that a strong monitoring capability will facilitate the superior’s evaluation of the truthfulness of the agent’s claim. We further find that asymmetric budget ratcheting is associated with higher subsequent achievement of performance goals and less slack-building behavior.

Authors

• Seung-Youb Han, Hongik University

• Sun-Moon Jung, Seoul National University

• Sohee Park, Seoul National University

• Jae Yong Shin, Seoul National University