Psychological Capital Strengthens the Effect of Budget Participation on Budgetary Slack?

Abstract

This research is based on a phenomenon in the Bandung City Government, where there is still a reasonably significant difference between budget targets and budget realization. The existence of budgetary participation and psychological capital are essential factors that are expected to reduce budgetary slack. For this reason, this study aims to examine the effect of budgetary participation on budgetary slack and the effect of budgetary participation on budgetary slack moderated by psychological capital. This research was conducted in 22 Bandung City Regional Offices using verification research methods and quantitative approaches. This study uses primary data collected through the distribution of questionnaires and the determination of respondents is based on non-probability sampling and purposive sampling. By the established criteria, questionnaires were given to treasurers and parties who participated in budgeting at 22 Bandung City Regional Offices. The proposed hypothesis was tested using moderated regression analysis (MRA). The results showed that budget participation had a positive effect on budgetary slack, and psychological capital strengthened the influence of budgetary participation on budgetary slack. This research has implications especially for the Bandung City Government to pay more attention to setting more measurable budget targets, increase more significant influence, and increase confidence in individuals involved in budgeting.