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Indiana University Bloomington

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Journal Articles

The Effect of Information Asymmetry on Negotiated Budgets: An Empirical Examination

2002, Accounting, Organizations, & Society

Joseph G. Fisher, J. R. Fredrickson, S. A. Peffer

Abstract

This study examines 3 issues: 1. the effect of information asymmetry on the budget negotiation process, 2. the effect of information asymmetry on budgetary slack when budgets are set through a negotiation process, and 3. whether subordinates consider superiors imposing a budget following a failed negotiation as being low in procedural justice, which in turn causes low subordinate performance. The results suggest that smaller differences in initial negotiation positions do not indicate a higher likelihood of agreement when initial differences are due to differential information asymmetry. Having superiors impose a budget after a failed negotiation causes justice or fairness considerations to demotivate subordinates.

Citation

Fisher, Joseph G., J. R. Fredrickson, and S. A. Peffer (2002), “The Effect of Information Asymmetry on Negotiated Budgets: An Empirical Examination,” Accounting, Organizations and Society, Vol. 27, January-March, pp. 27-43.