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Budget Participation and Job Performance of South Korean Managers Mediated by Job Satisfaction and Job Relevant Information

Maria A. Leach-Lpez* Assistant Professor Auburn University Montgomery PO Box 244023 Montgomery, AL 36124-4023 Phone: 334-244-3274 Fax: 334-244-3792 mleach@mail.aum.edu William W. Stammerjohan Associate Professor Louisiana Tech University Ruston, LA Phone: 318-257-3828 Fax: 318-257-4253 Wstammer@cab.latech.edu Kyoo Sang Lee Professor Mokwon University Deajeon, Korea Telephone: 82-42-829-7732 Fax: 82-42-823-2707 kslee@mokwon.ac.kr June 8, 2007
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Budget Participation and Job Performance of South Korean Managers Mediated by Job Satisfaction and Job Relevant Information ABSTRACT This study extends the stream of participative budgeting literature to South Korean managers. This study employs the path model introduced to this literature by Leach-Lpez et al. (2007) to examine and compare the budget participation-performance relationship for South Korean managers working either for US controlled or Asian controlled companies in South Korea. The Leach-Lpez et al. path model allows the examination of the direct effects of budget participation on performance and the indirect effects between budget participation and performance that run through job satisfaction and job relevant information. The primary findings of this study are that while there are strong associations between budget participation and performance for both samples of managers, the causal mechanisms connecting budget participation to performance are different among these two groups. The information-communication connection between budget participation and performance is stronger among the South Korean managers working for US controlled companies.

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Budget Participation and Job Performance of South Korean Managers Mediated by Job Satisfaction and Job Relevant Information INTRODUCTION The relationship between budget participation and performance has a long history in the managerial accounting literature (e.g., Argyris 1952; Brownell 1981, 1982a, 1983; Frucot and Shearon 1991; Kren 1992; Chow et al. 1991, 1994, 1996, 1999). Using meta-analysis, Greenberg et al. (1994) summarized the empirical literature up to that time and found that, on average, the positive correlations between participation and performance had been supported by both survey and experimental studies. We contribute to this literature by examining the relationship between budget participation and performance among Korean managers working for either US controlled or Asian controlled companies. We specifically extend the work of Leach-Lpez, Stammerjohan, and McNair (2007) (hereafter LSM) by applying the LSM theories and models to a sample of Korean managers. Our study is similar to LSM in that we have host country managers working for US controlled companies in a foreign country. Our study differs from LSM in that the setting is Korea vs. Mexico and that the referent group in our study is Korean managers working for Asian (host culture) controlled companies as opposed to the referent group in LSM which was US managers working within the US. Our results are similar to LSM in that we find the role of job relevant information is more important in the budget participation-performance link among the Korean managers working for US controlled companies than it is among their peers. Our results differ from LSM in that we also find that job satisfaction plays a significant mediating role between budget participation and performance among our Korean managers working for US controlled companies. Hofstede (1999) asserts that management systems in the 21st Century will not be basically different from management systems in the 20th Century. However, he expects that successful
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multinational companies will consider culture when trying to adapt their management control systems in foreign settings. Hofstede believes that research is needed to determine the transferability of management control systems from one country to another. Schoenfeld (1994) examines managerial accounting in multinational companies. He argues that, in spite of its importance for decision-making, management accounting of foreign operations is a neglected subject. While foreign operations may have been seen as too small to merit much attention, and while multinationals may have believed that domestic managerial accounting procedures could be applied to foreign operations without modification, these factors may no longer apply. The sheer expansion of global operations and the documented unique needs in specific situations leads Schoenfeld to conclude that managing foreign operations now represents a major challenge to managers and accountants.1 THEORY AND HYPOTHESIS-DEVELOPMENT Our review of the pertinent literature, our theory, and our hypothesis-development, are presented in two sections. We first review the literature and second we develop our hypotheses regarding the relationship between budget participation and performance. Budget Participation and Performance While prior research has commonly measured the relationships between budget participation and performance, and between budget participation and job satisfaction separately (e.g., Brownell 1981, 1982b, 1983; Frucot and Shearon 1991), we follow several recent studies that use performance as the sole dependent variable (e.g., Nouri and Parker 1998; Shields et al. 2000; Leach-Lpez et al. 2007) and avoid reliance on the assumption that satisfaction leads to
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For example, when budgets are used as a control mechanism, they require a more detailed procedure for international subsidiaries than for domestic operations. Also, the unique situation of each subsidiary may require a highly individualized budgeting procedure. October 13-14, 2007 Rome, Italy 4

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performance by using the LSM model that includes both job satisfaction and job relevant information as mediating variables. The choice of variables and relationships in the LSM model are grounded in the antecedents findings of Shields and Shields (1998) and in the arguments made. Shields and Shields document in Appendix A, Table A1 (71-75) that among the 47 studies they examined, 25 listed motivation (performance), 23 listed information sharing, and 14 listed satisfaction as the assumed reasons that participative budgeting exists. Shields and Shields provide motivation for inclusion of satisfaction as a mediating variable by noting that most of the studies that listed satisfaction as an antecedent used motivation-performance as the dependent variable. The LSM path model includes one independent variable, budget participation (PART); one dependent variable, performance (PERF); and two mediating variables, job satisfaction (SAT) and job relevant information (JRI). The six theorized relationships between these variables are described as Paths A-F in Figure1 and, as argued in LSM, the motivation behind the proposed relationship between each pair of variables is presented below. FIGURE 1 LSM Path Model Job Relevant Information JRI E D B D Job Satisfaction SAT A A D C D F D

Budget Participation PART

Performance PERF

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Path A: PART PERF Shields and Shields (1998) cite three studies that found direct positive relationships between budget participation and performance (Milani 1975; Kenis 1979; Brownell and McInnes 1986). In a path analysis study, Chenhall and Brownell (1988) failed to find evidence of a direct effect. Frucot and Shearon (1991) find mixed results on this relationship. LSM include Path A in their model to capture the direct effect and to provide comparability with prior research. Path B: PART SAT Shields and Shields (1998) cite Hofstede (1967) as a study that found a positive relationship between budget participation and satisfaction. Chenhall and Brownell (1988) find both a significant direct relationship between budget participation and satisfaction and a significant indirect relationship between budget participation and satisfaction running through role ambiguity. Frucot and Shearon (1991) find a significant positive relationship between budget participation and satisfaction over parts of the sample. Lau and Tan (2003) find a significant path coefficient linking budget participation and job satisfaction among Singaporean managers. Path C: SAT PERF LSM include this path to better understand the complex relationships between participation and performance and to model a relationship that is commonly assumed, but not tested, in the existing budget participation-performance literature.2

See Luft and Shields (2003, 209-211) Appendix A for a comprehensive mapping of numerous budgeting relationships modeled at the individual employee (manager) level in the extant literature. Note further that among the 42 studies mapped in Appendix A, 21 include performance as a dependent variable, 11 include satisfaction as a dependent variable, and that none model the relationship between satisfaction and performance modeled by our Path C. October 13-14, 2007 Rome, Italy 6

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Path D: PART JRI Kren (1992) introduced a path model with job relevant information as an intervening variable between budget participation and performance. Kren theorized and found evidence that increased budget participation leads to increased job relevant information and that increased job relevant information leads to increased performance. Many other studies have theorized and/or found evidence of either a positive relationship between budget participation and information or a negative relationship between participation and role ambiguity (e.g., Chenhall and Brownell 1988; Brownell and Dunk 1991; OConnor 1995; Hassel and Cunningham 1996; Magner et al. 1996; Covaleski et al. 2003; Lau and Tan 2003). Path E: JRI SAT Lau and Tan (2003) theorize and find a positive relationship between job relevant information and satisfaction. Insofar as job relevant information reduces role ambiguity, the negative relationship between role ambiguity and satisfaction theorized and found by Chenhall and Brownells (1988) also supports LSMs expectation of a positive relationship between job relevant information and satisfaction. Path F: JRI PERF Path F represents the final path in Krens (1992) model of an indirect relationship between budget participation and performance running through job relevant information. LSMs expectation of a positive relationship between job relevant information and performance is supported by Krens findings and by the logic attributed to the psychology-based literature by Covaleski et al. (2003, 37), Participation in this sense can improve performance by providing a forum for the superior to communicate information to subordinates

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Budget Participation-Performance Hypotheses Hypothesis, H1 is a simple hypothesis that predicts a direct relationship between budget participation and performance modeled by Path A. Our remaining budget participationperformance hypotheses are joint hypotheses of the relationships modeled by Paths B-F. Support for hypotheses H2-H4 requires significance of each path included in the respective hypothesis. Hypothesis H3 represents the joint hypothesis proposed by Kren (1992). Hypotheses H2 and H4 include job satisfaction as a second mediating variable. The four formal budget participationperformance hypotheses stated in the alternative form are: H1: H2: Increased budget participation leads directly to increased performance. Path A: PART PERF Increased budget participation leads to increased job satisfaction and increased job satisfaction leads to increased performance. Path B and Path C: PART SAT PERF Increased budget participation leads to increased job relevant information and increased job relevant information leads to increased performance. Path D and Path F: PART JRI PERF Increased budget participation leads to increased job relevant information, increased job relevant information leads to increased job satisfaction, and increased job satisfaction leads to increased performance. Path D, Path E, and Path C: PART JRI SAT PERF

H3:

H4:

Importance of Communication Hypothesis Leach-Lpez et al. (2007), LSM, find that job relevant information (JRI) played a much more important role in explaining the overall relationship between participative budgeting and performance among their Mexican managers working for US controlled companies in Mexico than it did among US managers work for US owned companies in the US. Based on these findings we expect job relevant information (JRI) to play a more significant role in explaining the overall relationship between participative budgeting and performance among our Korean managers

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working for US controlled companies in Korea than among our Korean managers working for Asian controlled companies. H5: The strength of the joint relationship modeled by hypothesis H3, Path D and Path F: PART JRI PERF, will be stronger among Korean managers working for US controlled companies in Korea than among Korean managers working for Asian controlled companies. RESEARCH DESIGN Data for this study were collected by having each mid-level manager complete a survey instrument written in Korean.3 Hypotheses H1-H4 (budget participation to performance) are tested by estimating the models described below. Path Model Variables The level of budget participation (PART) is measured with a six-item scale developed by Milani (1975). This measure sums each item score measured with a seven-point Likert-type scale. This scale has been widely used in participative budget research (e.g., Brownell 1982c, 1983; Chenhall and Brownell 1988; Mia 1989; Frucot and Shearon 1991; Nouri and Parker 1998; Tsui 2001; Lau and Tan 2003; Hassel and Cunningham 2004). This scale has consistently produced reliable Cronbach (1951) alpha coefficients from 0.71 (Chenhall and Brownell 1988) to 0.91 (Mia 1989). Performance (PERF) is measured with an eight-dimension scale developed by Mahoney et al. (1963). The Mahoney et al. scale measures eight performance dimensions: planning, investigating, coordinating, evaluating, supervising, staffing, negotiating, and representing. PERF is the sum of these eight individual measures. The appropriateness of using self-reported measures
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Two procedures were performed to insure the equivalency of the English and Korean versions of our instrument. First, two individuals who both were born in Korea, residing in Korea, and both highly proficient in English and Korean prepared translations of the English version into Korean. The few differences were then corrected as needed. Second, following the method suggested by Hui and Triandis (1985), two subjects answered both the English and Korean versions. The answers were consistent and indicated no need for further changes in the instrument. October 13-14, 2007 Rome, Italy 9

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of performance and the reliability of the Mahoney et al. scale are well documented (Heneman 1974). This scale has been widely used in participative budgeting research (e.g., Brownell 1982b, 1983; Brownell and Hirst 1986; Brownell and McInnes 1986; Frucot and Shearon 1991; Tsui 2001). Self-reported performance is also used in other recent studies. Nouri and Parker (1998) employ a self reported measure of performance adapted from Govindarajan and Gupta (1985) and Shields et al. (2000) develop their own self-reported measure of performance.4 The level of job satisfaction (SAT) is measured with the short-form of the Minnesota Satisfaction Questionnaire (MSQ) (Weiss et al. 1967). The short-form version of the MSQ has been supported for its reliability and validity (Weiss et al. 1967), and has been used extensively in both applied psychology (e.g., Pulakos and Schmitt 1983; Butler 1983) and managerial accounting research (e.g., Brownell 1981, 1982b, 1982c; Harrison 1992, 1993; Lau and Tan 2003).5 The level of job relevant information (JRI) is measured with a scale developed by Kren (1992). The objective of this variable is to measure the managers perception of the availability of information for effective job related decisions. JRI consists of the sum of three questions answered on a scale of one to five, with anchors of strongly disagree and strongly agree. Kren documented the validity of his scale that continues to be used in the management accounting literature (e.g., Lau and Tan 2003; Leach-Lpez et al. 2007).

See Bommer et al. (1995) for a complete discussion of the implications of self-reported performance measures.

We use the modified rating categories advocated by Weiss et al. (1967). The modified ratings anchor on not satisfied and extremely satisfied. This modification overcomes the ceiling effect of response means located close to the maximum possible score when the categories are anchored on very dissatisfied and very satisfied, and centered on neither satisfied nor dissatisfied.

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LSM Path Model While multiple regression is an appropriate tool for measuring the incremental effects of two or more independent variables on a single dependent variable, multiple regression does not capture the phenomenon where the correlation between an explanatory variable and the dependent variable flows through one or more mediating variables. Luft and Shields (2003, 191) provide a clear explanation of why an additive model (multiple regression) would be inappropriate for our analysis. The LSM path model captures both the direct and indirect effects of budget participation on performance by including budget participation as the sole independent variable, performance as the sole dependent variable, and satisfaction and job relevant information as mediating variables.6 The path coefficients are estimated by solving the set of simultaneous equations represented by model (1). PERFi = A*PARTi + C*SATi + F*JRIi + e1i SATi = B*PARTi + E*JRIi + e2i JRIi = D*PARTi + e3i where PERF is performance measured using the Mahoney et al. (1963) eight-item scale; (1)

Other studies have also found significant mediating variables between participative standard setting and job performance (e.g., Nouri and Parker 1998; Shields et al. 2000). Nouri and Parker found that the paths between budget participation and performance that ran through budget adequacy and organizational commitment were both significant. Shields et al. found that the paths between participative standard setting and performance that flow through standard tightness and the level of standard-based incentives are only significant when the level of jobrelated stress was inserted between standard tightness and job performance, and between the level of standard-based incentives and job performance. In the interest of a parsimonious model we restrict our mediating variables to the two most common variables found in the extant literature, job relevant information and job satisfaction, as documented by Shields and Shields (1998). While our path model falls into the causes and effects of budgeting at the individual level described by the map in Appendix A of Luft and Shields (2003, 209), our path model is not fully described by any of the specific maps in their appendix. While some of the studies reviewed by Luft and Shields included job relevant information as an mediating variable, job satisfaction was only included as a dependant variable. October 13-14, 2007 Rome, Italy 11

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PART is budget participation measured as the sum of the six-item scale developed by Milani (1975); SAT JRI is job satisfaction measured using a modified form of the Minnesota Satisfaction Questionnaire (Weiss et al. 1967); and is job relevant information measured as the sum of the three-item scale developed by Kren (1992).

The estimated path coefficients A-F are used to test hypotheses H1-H4. Differences in the univariate strength of the Path D and Path F coefficients provide support for hypothesis H3. The difference between the relative strength of the joint Path D-Path F for managers working for the US controlled vs. the Asian controlled companies are used to test hypothesis H5. SAMPLE AND SUMMARY STATISTICS Sample The sample includes mid-level Korean managers working for manufacturing companies located in South Korea that are subsidiaries of US parent companies and mid-level Korean managers working for companies located in South Korea owned by Korean companies or by Korean/Japanese joint ventures. Each manager completed a survey instrument written in Korean. The responses were obtained by contacting one manager from each of 60 different companies with a US parent and one manager from each of 20 different companies with either Korean or joint Korean/Japanese ownership. The questionnaires were both distributed and returned by mail. The final sample included 54 managers working for companies with a US parent (the US controlled sample) and 17 managers working for Korean companies or Korean/Japanese joint ventures (the Asian controlled sample).7

The response rates are quite high, 90% (54/60) for the US controlled sample, and 85% (17/20) for the Asian controlled sample. October 13-14, 2007 Rome, Italy 12

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Demographics Table 1 provides summary demographics and Table 2 provides means and a test of means between the managers (subjects) working for either US controlled or Asian controlled companies. As can be seen in Table 1, the vast majority of our subjects are between 30 and 49 years of age, are predominately male, and that the majority of our subjects have at least attended college. The tests of differences in mean responses reported in Table 2 indicate that the two samples do not vary significantly over any of the path model or demographic variables, p0.2317. [Please insert Tables 1 and 2 about here.] BUDGET PARTICIPATION-PERFORMANCE RESULTS The simple correlations between the four path variables, PART, JRI, SAT, and PERF, measured over the full (combined), US controlled, and Asian controlled samples are reported in Panels A-C of Table 3. The estimated path coefficients are presented in Table 4 for our two samples. The path model results are also reported graphically in Figures 2, 3 and 4. The path model coefficients are estimated by solving the system of equations in model (1) using the CALIS procedure (Covariance Analysis of Linear Structural Equations) provided by SAS (SAS Institute Inc. 1990, 292-365). The simple correlations reported in Table 3 aid in our basic understanding of the interrelationships among our path variables. The path coefficients provide our tests of hypotheses H1-H4, the simple and complex participation-performance relationships. The joint hypotheses (H2-H4) p-values are based on the joint probabilities of the individual path coefficients. The correlations in Table 3, path coefficients and differences in path coefficients in Table 4, and the path coefficients in Figures 2, 3, and 4 with p-values 0.05 are reported in bold. The hypotheses H2-H4 joint p-values are reported at the bottom of Table 4.
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[Please insert Tables 3, 4 and Figures 2, 3, and 4 about here.] Simple Correlations As reported in Table 3, Panels A and B, all four path variables, performance (PERF), job relevant information (JRI), job satisfaction (SAT), and budget participation (PART), are highly correlated among our full (combined) and US controlled samples, p0.0006 and p0.0004, respectively. While, as reported in Table 3, Panel C, performance (PERF) is highly correlated with the other three path model variables, job relevant information (JRI), job satisfaction (SAT), and budget participation (PART), p0.0415, these three path model variables, job relevant information (JRI), job satisfaction (SAT), and budget participation (PART), are not significantly correlated with one another, p0.1972. Hypotheses H1, H2, H3, H4, H5 Path Model Tests Similar to the Leach-Lpez et al. (2007) (LSM) Mexican manager results, the direct path between budget participation (PART) and performance (PERF) modeled by Path A and described by hypothesis H1 is not fully supported by any of our Korean samples, p0.0538. Also similar to LSMs Mexican manager results, the indirect relationship between budget participation (PART) and performance (PERF) running through job relevant information (JRI) described by hypothesis H3 is fully supported by our full (combined) sample and US controlled sample, joint probability0.0489. Similar to LSMs US manager results, the indirect relationship between budget participation (PART) and performance (PERF) running through job relevant information (JRI) described by hypothesis H3 is not supported by our Asian controlled sample, joint probability=0.1009. In contrast to any of LSMs results, our combined and US controlled results support both the relationship between budget participation (PART) and performance (PERF) that runs through job satisfaction (SAT) described by hypothesis H2 and the more complex relationship

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between budget participation (PART) and performance (PERF) that runs through job relevant information (JRI and job satisfaction (SAT) described by hypothesis H4, joint probabilty0.0221 and joint probabilty0.0292, respectively. The hypothesis H5 results regarding our prediction that the information aspect of the budget participation process would play a stronger role among the Korean manager working for US controlled companies as compared to the Korean manager working for Asian controlled companies are mixed. While, as reported in the US vs. Asian column of Table 4, an incremental change in the level of job relevant information (JRI) has a significantly larger impact on performance among our Korean managers working for Asian controlled companies, p=0.0208, an incremental change in the level of participation (PART) has a smaller impact on the level job relevant information (JRI) among the Asian controlled sample. While the univariate difference in the participation (PART) to job relevant information (JRI) is not significantly different between the two samples, p=0.4650, the overall effect of the joint relationships connecting budget participation (PART) to performance (PERF) through job relevant information (JRI) described by hypothesis H3 is significant among the US controlled sample and not significant among the Asian controlled sample. CONCLUSIONS, LIMITATIONS, AND FUTURE RESEARCH The primary findings of this study are that while there are strong associations between budget participation and performance among all of our South Korean managers, the causal mechanisms connecting budget participation with performance are slightly different for our two samples. Similar to the finding of Leach-Lpez et al. (2007) (LSM), the overall informationcommunication connection between budget participation and performance appears to be more

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important for the Korean managers working for US controlled companies. While our findings corroborate the findings of LSM that the information-communication aspect of budget participation may become more important as the level of difficulty that foreign managers face when communicating with their US parent companies, becomes larger, our findings also substantiate the subtle differences that may exist in each location. While LSM did not find that job satisfaction played a significant role in the connection between budget participation and performance among their Mexican managers working for US controlled companies in Mexico, our results indicate that job satisfaction plays a significant role in the connection between budget participation and performance among our Korean managers working for US controlled companies in Korea. Our study suffers from three common limitations found in all cross-sectional survey research: (1) the lack of temporal precedence between the independent and dependent variables; (2) any limitations imbedded in the scales used to measure our variables; and, (3) the generalizability of our samples. While the lack of temporal precedence between budget participation, job relevant information, job satisfaction, and performance precludes formal tests of causality, and while we cannot say that better performers are not provided more job relevant information and allowed greater participation, the primary implications of our findings are largely unaffected by the direction of these relationships. Our finding that job relevant information plays a role among foreign managers working for US controlled companies offers insights to US multinationals whether the process starts with participation or performance. While our scales may contain their own limitations, we employ scales that have been well tested. Finally, while our samples may not fully represent all South Korean managers, our study is the first study we are

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aware of that allows a comparison of South Korean managers who work for either US controlled or Asian controlled companies. We also acknowledge the potential limitation of using self-reported measures of budget participation and performance. Locke et al. (1997) define these single-source measures as the percept-percept method. While the findings of both Greenberg et al. (1994) and Locke et al. (1997) suggest that the single source method may produce higher correlations than multi-source methods, both Locke et al. and Greenberg et al. find that the positive correlations persist in the multi-source studies. Self-reported levels of participation may be more relevant than external measures of participation because it should be the subjects perception of budget participation that influences behavior. While external measures of performance have some documented benefits, self-reported measures of performance remain a common practice in the literature (e.g., Nouri and Parker 1998; Shields et al. 2000; Leach-Lpez et al. 2007). Even with the enumerated limitations, the findings of this study should have important implications for US companies employing US management techniques in their foreign operations. The findings of this study also suggest several avenues for future research. While the information provided by this study has implications for US multinational companies operating in South Korea, similar research may be warranted across a variety of locations. Further research is needed to determine whether the findings of this study are driven by the uniqueness of the Korean managers in our study, managers who have self-selected to work for US controlled companies; or whether the information-communication aspect of budget participation may prove to be useful in other settings where communication difficulty is high.

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REFERENCES Argyris, C. 1952. The Impact of Budgets on People. New York, NY: The Controllership Foundation. Bommer, W. H., J. L. Johnson, G. A. Rich, P. M. Podsakoff, & S. B. Mackenzie. 1995. On the interchangeability of objective & subjective measures of employee performance: A metaanalysis. Personnel Psychology 48: 587-605. Brownell, P. 1981. Participation in budgeting, locus of control & organizational effectiveness. The Accounting Review 56 (October): 844-860. ______. 1982a. Participation in the budgeting process - When it works and when it doesnt. Journal of Accounting Literature (Spring): 124-153. ______. 1982b. A field study examination of budgetary participation and locus of control. The Accounting Review 57 (October): 766-777. ______. 1982c. The role of accounting data in performance evaluation, budgetary participation and organizational effectiveness. Journal of Accounting Research (Spring): 12-27. ______. 1983. Leadership style, budgetary participation and managerial behavior. Accounting, Organizations and Society 8 (4): 307-321. ______, & M. K. Hirst. 1986. Reliance on accounting information, budgetary participation, and task uncertainty: Tests of a three-way interaction. Journal of Accounting Research (Autumn): 241-249. ______, & M. McInnes. 1986. Budgetary participation, motivation, and managerial performance. The Accounting Review 61 (October): 587-600. ______, & A. S. Dunk. 1991. Task uncertainty and its interaction with budgetary participation and budget emphasis: Some methodological issues and empirical investigation. Accounting, Organizations and Society 16: 693-703. Butler, J. K. 1983. Value importance as a moderator of the value fulfillment-job satisfaction relationship: Group differences. Journal of Applied Psychology (August): 420-428. Chenhall, R. H., & P. Brownell. 1988. The effect of participative budgeting on job satisfaction and performance: Role ambiguity as an intervening variable. Accounting, Organizations and Society 13 (3): 225-233. Chow, C. W., M. D. Shields, & Y. K. Chan. 1991. The effects of management controls and national culture on manufacturing performance: An experimental investigation. Accounting, Organizations and Society 16 (3): 209-226

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______, Y. Kato, & M. D. Shields. 1994. National culture and the preference for management controls: An exploratory study of the firm-labor market interface. Accounting, Organizations and Society 19 (4,5): 381-400. ______, Y. Kato, & K. A. Merchant. 1996. The use of organizational controls and their effect on data manipulation and management myopia: A Japan vs. US comparison. Accounting, Organizations and Society 21 (2,3): 175-192. ______, M. D. Shields, & A. Wu 1999. The importance of national culture in the design of and preference for management controls for multi-national operations. Accounting, Organizations and Society 24: 441-461. Covaleski, M. A., J. H. Evans III, J. L. Luft, & M. D. Shields. 2003. Budgeting research: Three theoretical perspectives and criteria for selective integration. Journal of Management Accounting Research 15: 3-49. Cronbach, L. J. 1951. Coefficient alpha and internal structure of tests. Psychometrika (September): 297-334. Frucot, V., & W. T. Shearon. 1991. Budgetary participation, locus of control, and Mexican managerial performance and job satisfaction. The Accounting Review 66 (January): 80-98. Govindarajan, V., & A. K. Gupta. 1985. Linking control systems to business unit strategy: Impact on performance. Accounting, Organizations and Society 10: 51-66. Greenberg, P. S., R. H. Greenberg, & H. Nouri. 1994. Participative budgeting: A meta-analytic examination of methodological moderators. Journal of Accounting Literature 13: 117-141. Harrison, G. L. 1992. The cross-cultural generalizability of the relation between participation, budget emphasis and job related attitudes. Accounting, Organizations and Society 17 (1): 115. ______. 1993. Reliance on accounting performance measures in superior evaluative style - The influence of national culture and personality. Accounting, Organizations and Society 18 (4): 319-339. Hassel, L. G., & G. M. Cunningham. 1996. Budget effectiveness in multinational corporations: An empirical test of the use of budget controls moderated by two dimensions of budgetary participation under high and low environmental dynamism. Management International Review 36 (Third Quarter): 245-266. ______. 2004. Psychic distance and budget control of foreign subsidiaries. Journal of International Accounting Research 3: 79-93. Heneman, H. G. III. 1974. Comparisons of self and superior ratings of managerial performance. Journal of Applied Psychology 59 (5): 29-53.
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Hofstede, G. H. 1967. The Game of Budget Control. Assen, The Netherlands: Van Gorum. ______. 1999. Problems Remain, But Theories Will Change: The Universal And The Specific in 21st-Century Global Management. Organizational Dynamics, Vol. 28 Issue 1: 34-45. Hui, C. H., & H. C. Triandis. 1985. Measurement in cross-cultural psychology: A review and comparison of strategies. Journal of Cross-Cultural Psychology 16 (June): 131-152. Kenis, I. 1979. Effects of budgetary goal characteristics on managerial attitudes and performance. The Accounting Review 54 (October): 707-721. Kren, L. 1992. Budgetary participation and managerial performance: The impact of information and environmental volatility. The Accounting Review 67 (July): 511-526. Lau, C. M., & S. L. C. Tan. 2003. The effects of participation and job relevant information on the relationship between evaluative style and job satisfaction. Review of Quantitative Finance and Accounting 17: 17-34. Leach-Lpez, M. A., W. W. Stammerjohan, & F.M. McNair. 2007. Differences in the role of job relevant information in the budget participation-performance relationship among US and Mexican managers: A question of culture or communication? Journal of Management Accounting Research (forthcoming). Locke, E. A., M. Alavi, & J. A. Wagner III. 1997. Participation in decision making: An informative exchange perspective. Research in Personnel and Human Resource Management 15: 293-331. Luft, J., & M. D. Shields. 2003. Mapping management accounting: Graphics and guidelines for theory-consistent empirical research. Accounting, Organizations and Society 28: 169-249. Magner, N., R. B. Welker, & T. L. Campbell. 1996. Testing a model of cognitive budgetary participation process in a latent variable structural equations format. Accounting and Business Research 27: 41-50. Mahoney, T. A., T. H. Jerdee, & S. J. Carroll. 1963. Development of Managerial Performance: A Research Approach. South-Western Publishing, Co. Mia, L. 1989. The impact of participation in budgeting and job difficulty on managerial performance and work motivation: A research note. Accounting, Organizations and Society 14 (4): 347-357. Milani, K. 1975. The relationship of participation in budget-setting to industrial supervisor performance and attitudes: A field study. The Accounting Review 50 (April): 274-284.

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Nouri, H., & R. J. Parker. 1998. The relationship between budget participation and job performance: The roles of budget adequacy and organizational commitment. Accounting, Organizations and Society 23: 467-483. OConnor, N. G. 1995. The influence of organizational culture on the usefulness of budget participation by Singaporean-Chinese managers. Accounting, Organizations and Society 20: 383-403. Pulakos, E. D. & N. Schmitt. 1983. A longitudinal study of a valence model approach for the prediction of job satisfaction of new employees. Journal of Applied Psychology: 307-312. SAS Institute Inc. 1990. SAS/STAT Users Guide, Version 6. 4th edition. Volume 1. North Carolina: SAS Institute Inc. Shields, J. F., & M. D., Shields. 1998. Antecedents of participative budgeting. Accounting, Organizations and Society 23: 49-76. Schoenfeld, H. M. W. 1994. Management Accounting in Multinational Companies: Typical Data Adjustments and Unresolved Problems. Advances in International Accounting, Volume 6: 203-230. Shields, M. D., F. J. Deng, & Y. Kata. 2000. The design and effects of control systems: Tests of direct- and indirect-effects models. Accounting, Organizations and Society 25: 185-202. Tsui, J. S. L. 2001. The impact of culture on the relationship between budgetary participation, management accounting systems, and managerial performance: An analysis of Chinese and Western managers. Accounting, Organizations and Society 36: 125-146. Weiss, D. J., R. V. Davis, G. W. England, & L. H. Lofquist. 1967. Manual for the Minnesota satisfaction questionnaire. Minnesota Studies in Vocational Rehabilitation XXII (October): Bulletin 45.

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TABLE 1: Demographics Sample US Controlled % 54 96% 4% 1% 1% 11% 35% 46% 4% 0% 0% 6% 73% 21% 51 3 1 0 5 21 26 1 0 0 4 38 12 94% 6% 2% 0% 9% 39% 48% 2% 0% 0% 7% 70% 22%

Full Respondents: Sex: Male Female 24 or less 25-29 30-34 35-39 40-49 50-59 60+ Up to 9th grade 10th to 12th grade Come college Post graduate 71 68 3 1 1 8 25 33 3 0 0 4 52 15

Asian Controlled 17 17 0 0 1 3 4 7 2 0 0 0 14 3

100% 0% 0% 6% 18% 24% 41% 12% 0% 0% 0% 82% 18%

Age:

Education:

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TABLE 2: Comparison of Sample Means US Controlled Asian Controlled Sample Sample t-statistic p-value 53-54 17 47.85 50.06 -0.88 0.3831 30.72 28.47 1.02 0.3130 17.24 19.71 -1.33 0.2735 65.30 64.94 0.13 0.8997 9.40 9.80 0.02 0.9828 2.71 3.59 -1.21 0.2317 0.94 1.00 na na 16.15 16.41 -0.54 0.5929 5.37 5.35 0.07 0.9450 - Performance measured using the Mahoney et al. (1963) eight-item scale. - Budget participation measured as the sum of the six-item scale developed by Milani (1975). - Job relevant information measured as the sum of the three-item scale developed by Kren (1992). - Job satisfaction measured using a modified form of the Minnesota Satisfaction Questionnaire (Weiss et al. 1967). Years with the company. Years in current position. Sex, where 1 equals male and 0 equals female. Years of school. Age reported in ranges, <20=1, 20-24=2, 25-29=3, 30-34=4, 35-39=5, 40-49=6, 5059=7, and 60=8.

N PERF PART JRI SAT FYR JYR SEX SCH AGE PERF PART JRI SAT FYR JYR SEX SCH AGE

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TABLE 3: Simple Correlations Panel A - Full (Combined ) Sample N=71 PERF PERF 1 JRI 0.54405 (<0.0001) SAT 0.52559 (<0.0001) PART 0.46768 (<0.0001) Panel B - US Controlled Sample N=54 PERF PERF 1 JRI 0.48880 (0.0002) SAT 0.53044 (<0.0001) PART 0.48528 (0.0002) Panel C - Asian Controlled Sample N=17 PERF PERF 1 JRI

JRI

SAT

PART

1 0.39642 (0.0006) 0.47159 (<0.0001) JRI 1 0.42467 (0.0002) SAT 1

PART

1 0.46874 (0.0004) 0.53125 (<0.0001) JRI 1 0.48774 (0.0002) SAT 1

PART

0.73842 1 (0.0007) SAT 0.53617 0.13065 1 (0.0265) (0.6172) PART 0.49893 0.32903 0.17728 1 (0.0415) (0.1972) (0.4961) The correlations with p-values 0.05 are reported in bold PERF - Performance measured using the Mahoney et al. (1963) eight-item scale. PART - Budget participation measured as the sum of the six-item scale developed by Milani (1975). JRI - Job relevant information measured as the sum of the three-item scale developed by Kren (1992). SAT - Job satisfaction measured using a modified form of the Minnesota Satisfaction Questionnaire (Weiss et al. 1967).

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TABLE 4: Path Analysis Results

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Sample Full 70 61 0.1750 1.62 0.0549 0.3066 2.56 0.0065 0.3164 3.06 0.0017 0.4716 4.44 0.0000 0.2504 2.09 0.0204 0.3357 3.16 0.0012 0.0082 0.0013 0.0221 US Controlled 53 44 0.2089 1.54 0.0658 0.3339 2.43 0.0095 0.3193 2.45 0.0092 0.5312 4.52 0.0000 0.2896 2.11 0.0202 0.2271 1.69 0.0489 0.0186 0.0489 0.0292 Asian Controlled 17 8 0.2243 1.81 0.0538 0.1506 0.58 0.2890 0.4167 3.53 0.0038 0.3290 1.39 0.1005 0.0811 0.31 0.3814 0.6102 4.97 0.0005 0.2917 0.1009 0.4457

Diff. US vs. Asian 70 52 -0.0154 0.03 0.9726 0.1833 0.85 0.3995 -0.0974 -1.19 0.2394 0.2022 0.74 0.4650 0.2085 1.69 0.0972 -0.3831 -2.38 0.0208

Path Names, Path Descriptions, and Hypotheses Numbers A H1 B PART PERF

N df corr. t-stat p-value corr. t-stat p-value corr. t-stat p-value corr. t-stat p-value corr. t-stat p-value

PART SAT

SAT PERF

PART JRI

JRI SAT

JRI PERF

H2 H3 H4

corr. t-stat p-value PARTSATPERF joint prob. PARTJRIPERF joint prob. PARTJRISATPERF joint prob.

The path coefficient p-values are based on one sided tests and the difference p-values are based on two-sided test. The joint hypotheses p-values are based on joint probabilities. The path coefficients and differences in path coefficients with p-values 0.05 are reported in bold PERF PART JRI SAT Performance measured using the Mahoney et al. (1963) eight-item scale. Budget participation measured as the sum of the six-item scale developed by Milani (1975). Job relevant information measured as the sum of the three-item scale developed by Kren (1992). Job satisfaction measured using a modified form of the Minnesota Satisfaction Questionnaire (Weiss et al. 1967).

FIGURE 2 Full Sample Path Model

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JRI 0.4716 (0.0000) D 0.3066 (0.0065) B PART A 0.1750 (0.0549) PERF 0.2504 (0.0204) E SAT 0.3164 (0.0017) C

0.3357 (0.0012)

P-values are reported in parentheses and the path coefficients with p-values 0.05 are reported in bold. FIGURE 3 US Controlled Sample Path Model JRI 0.5312 (0.0000) D 0.3339 (0.0095) B PART A 0.2089 (0.0658) PERF 0.2896 (0.0202) E SAT 0.3193 (0.0092) C

0.2271 (0.0489)

P-values are reported in parentheses and the path coefficients with p-values 0.05 are reported in bold.

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FIGURE 4 Asian Controlled Sample Path Model

JRI 0.3290 0.0811 (0.1005) (0.3814) D E SAT 0.1506 (0.2890) B PART A 0.2243 (0.0538) PERF 0.4167 (0.0038) C

0.6102 (0.0005)

P-values are reported in parentheses and the path coefficients with p-values 0.05 are reported in bold.

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