Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting

Jeremy Douthit, Michael Majerczyk, Lisa Mcluckie Thain

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Information asymmetry is fundamental to participative budgeting. Hannan, Rankin, and Towry (2006, “HRT”) develop a nuanced theory regarding the effect of information asymmetry on slack. The authors provide evidence that suggests increasing the precision of a superior’s information system, thereby reducing information asymmetry, can increase slack. We develop a refined version of HRT’s theory by incorporating evidence of how nonpecuniary incentives affect subordinates’ reporting slack from research subsequent to HRT. Our updated theory predicts that slack decreases as information system precision increases, opposite to the results in HRT. To test our refined theory, we replicate HRT’s experiment and find results consistent with our theory. Our results support HRT’s general theory but highlight the importance of establishing regularities of how nonpecuniary incentives affect behavior in accounting. Specifically, our updated theory and new evidence suggest that improving information system precision decreases budgetary slack, contrary to the results suggested in HRT.

Original languageEnglish (US)
Pages (from-to)73-94
Number of pages22
JournalJournal of Management Accounting Research
Issue number1
StatePublished - Mar 1 2024


  • honesty
  • impression management
  • participative budgeting
  • replication
  • slack

ASJC Scopus subject areas

  • Business and International Management
  • Accounting


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