Proceedings

Shields and Shields (1998) have reviewed 47 published papers which had
investigated the effects of participative budgeting on several dependent variables.
Performance with 31 frequencies is the most frequent dependent variable in those
researches. Although organisational scholars such as Argyris (1952) and Becker and
Green (1962) have proposed positive relationship between participative budgeting
and performance (Kren, 1992), results of the studies in management accounting in this
regard are somehow equivocal (Chenhall, 1986). Therefore, many of the studies in
this field have looked at a mediating variable which may affect the relationship
between participation and performance. While the definition of budgets proposed by
King et al. (2010) can also be employed for public organizations, participative
budgeting in a public organization is not quite similar to a private organization, so it is
expected that its mediating variable may also vary. In public sector organizations, at
least in context of Iranian universities budgeting system is mainly about distribution
of funds between different departments and activities. Thus, it seems that if
participative budgeting could improve the Departments’ satisfaction with budgets it
might improve their performance, otherwise it may do not have any positive
consequence on performance or even negative, as it might create extra duty for each
department and employee. A significant association has been confirmed between
participative budgeting and both of job satisfaction and satisfaction with budgets
(Chenhall, 1986). So it can be expected to:
H5. “Universities’ departmental performance” is (a) positively related to
“participative budgeting”, (b) mediating by “satisfaction with budgets”.
Hopwood (1972) proposed three different styles of performance evaluation so called
Profit Conscious and Budget Constrained as well as Non- accounting Measures. He
concluded that use of Profit Conscious style is more related to the improved
organizational performance and less job-related tension amongst employees and their
supervisors, however Otley (1978) could not confirm this results in another company
and tried to justify the contradictory results by proposing the difference between main
activity centres in those companies. Many other studies in Finance Theory framework
found that budget control which is resulted from financial pressure in state-owned
enterprise which are production firms could have negative effects on employment,
pay rise, and sustainability in market, but a positive effect on productivity (Bertero
and Rondi, 2000, Nickell and Nicolitsas, 1999, Musso and Schiavo, 2008).
Nonetheless, it should be borne in mind that budget control in Iranian universities
mainly is about cash and fund, so it is somehow different with budget control in
private organizations. Shen (2003) found that budget constraint in US hospitals is
adversely related to the quality of their performance. In higher education field also
many studies have discussed consequences of budget constraint on their performance.
Reform in universities’ funding resulted in more budget control in Ghana’s
universities could reduce their efficiency and create many problems for them (Brock,
1996), this is also the case for the universities in Sri Lanka (Chandrasiri, 2003).
Greenaway and Haynes (2003) argue that budget constraint in UK universities
resulted in poorer performance in at least four aspects of activities namely class size,
recruitment and remuneration, research, and social exclusion, although universities
have endeavoured to compensate this problem by increasing their productivity. So the
sixth hypothesis is proposed as below:
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