Bambang Subroto, Rosidi, Bambang Purnomosidhi Departement of Accounting, Faculty of Economics and Business, Brawijaya University

Transcription

1 GEDER DIFFERECES O THE IFLUECE OF ETHICAL JUDGMET AD MORAL REASOIG TOWARD BUDGET SLACK BEHAVIOR I PUBLIC SECTOR Syamsuri Rahim Doctoral Program of Accounting, Faculty of Economics and Business, Brawijaya University Corresponding author Bambang Subroto, Rosidi, Bambang Purnomosidhi Departement of Accounting, Faculty of Economics and Business, Brawijaya University Abstract This study examined gender differences on the influence of ethical considerations and moral reasoning toward slack behavior on local government budgets. The objective of this study is to describe the ethical considerations and moral reasoning for male and female toward the tendency of an individual's behavior creates slack budget. Data collection was done through questionnaires and multiple linear regression analysis testing with multi-group approach. The result findings show that there are gender differences from two groups on the influence of moral reasoning and ethical judgment on the behavior of individuals in making budgetary slack. This finding explains that female is stronger than male in term of ethical judgment influence and moral reasoning toward individual behavior that reduces budget slack action. Keywords: Budget Slack Behavior; Ethical Judgment; Moral Reasoning; Gender Differences. BACKGROUD The issue of this study deals with the behavior of individuals in making budgetary slack in public sector organizations. Furthermore, this study discusses whether or not gender differences influence the ethical decisions and moral behavior of individuals to create budget slack. This research focuses on ethical behavior (Ponemon and Glazer, 990; Ponemon, 992; Shaub et al., 993; Stevens, 2002; Ho and Redfern, 200) and moral (Monga, 2007; Hobson et al., 20) to explain the behavior of the individual in making budgetary slack. Budget slack action is an ethical behavior and moral issues that have a potential impact towards the loss on the local government budget. This study aims to describe the behavior of budgetary slack that occurs in local governments of Indonesia. It mainly deals with the behavior of individuals in making budgetary slack with the goal of personal gain (Onsi 973) such as in some studies finding which state that individual ethical and moral issues in the proposed budget of Indonesia s local government (Maskun, 2009; Yuhertiana, 20). This study also aims to explain the gender difference (males or females) to determine ethical decisions (Eweje and Bruton, 200; Adebayo, 2007) and moral reasoning (Donenberg and Hoffman, 998) for individuals in taking action budgetary slack. Gender differences can COPY RIGHT 203 Institute of Interdisciplinary Business Research 227

2 affect the ethical and moral considerations difference for individuals to create budgetary slack. This study describes two gender groups, namely males and females. Then, they are tested to determine differences in ethical and moral decisions in taking action on budgetary slack (Yuhertiana, 20). 2. LITERATURE AD HYPOTHESES DEVELOPMET REVIEWS 2.. Agency Theory Agency theory in this study explains the superior-subordinate relationship in the scope of local government budget. Superior-subordinate relationship has implications for the emergence of agency problems due to the delegation of authority to subordinates (Eisenhardt 989). Lane (2003) describes that the superior-subordinate relationship in the preparation of the government budget to encourage subordinates tend to slack in their budgets behavior. Subordinates perform behaviors to create budgetary slack to allow subordinates to achieve the goals set Ethical Decision in Making Theory and Moral Reasoning Theory Behavior of individuals in creating budget slack can be explained through the ethical decisions by making theory and moral reasoning theory. Onsi (973) suggests that the behavior of individuals in creating budget slack can be explained by the theory of individual behavior itself. Jones (99) explains that individuals respond in the same way on all ethical situations, depending on the response of "moral intensity" of ethical situations as well as individual and organizational factors. Forsyth (992) found that individual ethical decisions are influenced by ethical considerations of ethical situations encountered in the organization. Douglas and Wier (2000) describes when an individual in a position of relative ethics positively influence the behavior of individuals in making budgetary slack, and when individual ethical ideal position negatively affect on the behavior to create budgetary slack. Kohlberg (969) explains that moral development is one way to exam moral reasoning. Kohlberg divided it into three levels of moral development that includes six stages based on a variety of scenarios involving responses toward moral dilemmas. Kohlberg's model of reasoning is widely used by researchers to explain the moral perception of individual moral action based on the perception of moral reasoning (Colby et al., 983; Weber, 990; Lovell, 997, and Monga, 2007). Hobson et al. (20) conducted an experimental study to assess the moral determinant factor of the slack budget. Moral perception test findings that are owned by individuals are personal values and social norms which shape individual moral frames involved in the COPY RIGHT 203 Institute of Interdisciplinary Business Research 228

3 preparation of the budget. Moral perceptions also affect an individual's propensity to create budgetary slack. Lord and DeZoort (200) found that moral reasoning determines the actions of individuals in the context of social stress (social influence pressure). Moral reasoning is a moral process steps for forming one's moral actions as developed in the concept of cognitive moral development (Kohlberg, 969) Gender Several previous studies explain that males and females have different behavior in ethical situations and moral dilemmas. Richmond (200) explains that there are gender differences in ethical judgment between males and females. Stedham et al. (2007) found gender differences between males and females in ethical considerations. Research results explain that females have a stronger ethical judgment than males. Yuhertiana (20) found that more females have good ethical decisions than males propensity to create budgetary slack Donemberg and Hoffman (988) explain that the gender differences between males and females faced by moral dilemma. Moral development of females is better than males (Kohlberg, 969). Gilligan (982) explains about moral development of males and females. And states that females have better moral reasoning in terms of responsibility that males do Hypothesis Based on the review of the above results, the hypothesis for the current study represent as follows: H: Differences between males and females in making ethical judgments affect on the behavior of budget slack H2: Differences between males and females in making moral reasoning affects on the behavior of budget slack H3: Females are better than males in the influence of ethical judgment towards the behavior of budgetary slack H4: Females are better than males in the influences moral reasoning on the behavior of budget slack 3. MATERIALS AD METHODS The sample method in this research uses proportional stratified random sampling method. The samples used are high-level managers to lower-level managers with the number of 49 COPY RIGHT 203 Institute of Interdisciplinary Business Research 229

4 units who work in the government of Makassar, the amount of collected data are 00 respondents. Meanwhile, the samples used are two groups of respondents which determined by sex, i.e males (n = ) and females (n = ). The instruments used are questionnaire and ethical judgment (Tan and Snell, 2002; Ho and Redfem, 200) which are measured by the 7 point on Likert scale, i.e a scale of (highly unethical) to 7 scale (very ethical). Instrument of moral reasoning (Colby et al., 983; Weber, 990; Monga, 2007) was measured with 7 point on Likert scale, i.e a scale of (strongly disagree) to 7 scale (strongly agree). Instrument of budget slack behavior (Hobson et al., 20; Lord and DeZoort, 200; Lukka, 988; Dunk, 993) was measured with 7 point on Likert scale, i.e a scale of (strongly disagree) to 7 scale (strongly agree). The analytical tool used is multiple linear regression analysis with Multi-Group approach. The following figure presents a model of the relationship between the studied variables: Ethical Judgment Moral Reasoning b b 2 b 2 b 22 Budget Slack Behavior Information: Gender: Men Gender: WOmen b Regression COefficient Figure. Interpersonal Research Variables Regression equation used is: Group (Males) Group 2 (Female) Y = β X + β 2 X 2 + e Y = β 2 X + β 22 X 2 + e 2 Information: Y = budget slack behavior, X = ethical judgment, X 2 = moral reasoning, β, β 2, β 2, β 22 = Regression Coefficient, e and e 2 = error term COPY RIGHT 203 Institute of Interdisciplinary Business Research 230

5 4. RESULTS AD DISCUSSIO 4. Instrument Testing The following tables are the validity testing and reliability of research instrument for each variable. Table shows that all values of each indicator and item correlations are above 0.3. Thus, the overall indicators and the item have a valid question. While the Cronbach alpha values obtained above 0.6 for all variables so that it can be concluded that the data instrument of the research has been valid. Table : Validity and Reliability Instrument Testing (n = 00) o Moral Reasoning Budget Slack Ethical Judgment (X) (X2) Behavior (Y) X X Y X X Y X X Y X X Y X X Y X X Y Y Cronbach Alpha Based on the table above, it shows that the correlation values for all items are greater than 0.3 that can be said all research instruments are valid. Reliability test was demonstrated by Cronbach alpha values. The results showed by Cronbach alpha values for all variables are greater than 0.6 so that the instrument is said to be a reliable research because the instrument proved to be valid and reliable, and therefore, further analysis can be done. There are four assumptions in regression analysis that must be met: the assumption of normality, no autocorrelation, the absence of heteroscedasticity, and there is no multi-co linearity. Testing the assumptions of normality using Kolmogorov-Smirnov test which showed the Sig from both models are and which indicates the value above 0.05 that the normality assumption is met. Testing the assumption of autocorrelation using the Durbin Watson test which shows the value of the two models is the DW 2.64 and 2.25 were in the range of.7 to 2.3 indicating the assumption of no autocorrelation. Testing the assumption of no heteroscedasticity using the Spearman correlation test showed in the Sig and 0.29 (model ), and and (model 2) are worth more than 0:05 so the assumption of no heteroscedasticity. The last assumption is multicollinearity using Variance Inflation Factor COPY RIGHT 203 Institute of Interdisciplinary Business Research 23

6 test (VIF). VIF value in model is,05 and VIF in model 2 is.402 showed values below 5, so the assumption of no multicollinearity. Thus, four assumptions are met so that the model has been unfit to be used Regression Analysis Results Table 2 shows the results of regression analysis on both models (male and female). Table 2: Results of Regression Analysis Relation Group (Males) Group 2 (Females) Ethical Judgment (X) to Budget Slack Behavior (Y) Moral Reasoning to Budget Slack Behavior (Y) β = t-hit = -4.8 Sig t = 0.000* β 2 = t-hit = Sig t = 0.000* Β 2 = t-hit = Sig t = 0.000* β 22 = t-hit = Sig t = 0.000* Sig F = 0.000* R 2 = Sig F = 0.000* R 2 = * = Significant at.00 Description: X: ethical judgment, X2: moral reasoning, and Y: budget slack behavior Regression equation for Group (Males) as follows: Y = X X 2, R 2 = While the regression equation for Group 2 (Females) as follows: Are graphically presented as follows: Y = X X 2, R 2 = Ethical Judgment Budget Slack Behavior Moral Reasoning Information: Gender: Men Gender: Women Figure 2: Result of Regression Analysis Simultaneously, the regression analysis testing by using F-test shows the Sig. F for both models for 0.000< 0.05, so it can be concluded that there are significant ethical judgment and moral reasoning on budget slack behavior on both gender both males and females, these results are consistent with the findings of Douglas and Wier (2000) found that ethical COPY RIGHT 203 Institute of Interdisciplinary Business Research 232

7 judgments influence on budget slack behavior. Hobson et al. (20) found that moral reasoning influence on budget slack behavior. The coefficient of determination in the group is for male or 46.8%, Budget slack behavior by 46.8% influenced by ethical judgment and moral reasoning, the remaining 53.2% is for other factors. The coefficient of determination in females group is or 67.5% which shows that the group of females, budget slack by 67.5% influenced by ethical judgment and moral reasoning, the remaining 32.5% by other factors. Of the coefficient of determination (R 2 ) shows that the influence of ethical judgment and moral reasoning on budget slack has better behavior for females group (67.5%) than in males group (46.8%). The test results lead that females have better consideration of ethical judgment and moral reasoning on budget slack behavior than males. These results prove the findings of gender differences (males or females) in consideration of ethics (Eweje and Bruton, 200) and moral reasoning (Donenberg and Hoffman, 998) in situations of ethical and moral dilemmas faced by individuals. This finding is consistent with the findings of Stedham et al. (2007) found that females have better ethical considerations than males. Donemberg and Hoffman (988) also stated that females have better moral reasoning than males. Partial test on males groups is as follows: In testing the effect of ethical judgment on budget slack behavior, the coefficient is , t- hit is -4.8 and Sig. t is Due to the Sig. t > 0.05, it indicates a significant effect between ethical judgments on budget slack behavior that has a negative coefficient. It indicates that the higher ethical judgment by males, the lower the budget slack behavior. The partial testing effect of moral reasoning on budget slack behavior shows that regression coefficients is , t- hit is and Sig. t is Due to the fact that Sig. t > 0.05, it indicates a significant effect between moral reasoning on budget slack behavior has a negative coefficient that indicates the higher moral reasoning by males, the lower the budget slack behavior. Highest regression coefficient values are a group of males, ethical judgment is stronger (dominant) effects on the behavior of budgetary slack, compared to the influence of moral reasoning on the behavior of budgetary slack. Partial testing on females groups as follows: Testing the effect of partially ethical judgment on budget slack behavior derived regression coefficient of , t-values hit at and Sig. t for Because the Sig. t > 0.05 indicate a significant effect between ethical judgment against budget slack. Has a negative coefficient indicates that the higher ethical judgment by females, the lower the budget slack behavior. COPY RIGHT 203 Institute of Interdisciplinary Business Research 233

8 ijcrb.webs.com Testing the effect in partial way of moral reasoning on budget slack behavior, it is shown that there is regression coefficients of , t- hit is and Sig. t is Due to the Sig. t > 0.05, it indicates that there is a significant effect between moral reasoning towards budget slack. It has a negative coefficient that indicates the higher moral reasoning by females, the lower the budget slack behavior. The highest regression coefficient values are the females group, moral reasoning is stronger (dominant) effects on the behavior of budgetary slack, compared to the influence of ethical judgment on the behavior of budgetary slack. The results show the difference from the two groups (males and females) to test the influence of moral reasoning and ethical judgment on the behavior of budgetary slack. This finding is consistent with Adebayo (2007) and Stedham et al. (2007) that females have stronger ethical judgment than males, so females have higher ethical judgment influence to create budgetary slack. Stedham et al. (2007), Donemberg and Hoffman (988) found that females have stronger moral reasoning than males, therefore, females have higher moral reasoning influences towards the behavior of budgetary slack. 5. COCLUSIOS AD RECOMMEDATIOS The research findings conclude that both gender groups suggests that ethical judgment and moral reasoning have effect toward behavior in creating budgetary slack. The results explain about gender differences, females have better ethical considerations than males, and females have a better moral reasoning than males. Furthermore, both results of the regression analysis show that there is a difference in from the second group (males and females) in testing the influence of ethical judgment and moral reasoning toward budget slack behavior. For males, the strongest influence is ethical judgment towards budget slack behavior, whereas in females, the effect is strongest on moral reasoning toward budget slack behavior. Meanwhile, the most significant influence from the research finding shows that females are stronger than males in term of ethical judgment and moral reasoning on budget slack behavior. It indicate that the ethical judgment negatively affect the behavior of individuals in creating budget slack, consistent findings of Douglas and Wier (2000). Moral reasoning negatively affect the behavior of individuals in creating budget slack, consistent findings of Hobson et al. (20), Lord and DeZoort (200), Blanchette et al. (992). Lastly, the implications of the research findings related to gender differences of males and females is the consideration of ethical and moral reasoning because this study only tested the gender differences. Therefore, it is advisable for further researchers to develop research on COPY RIGHT 203 Institute of Interdisciplinary Business Research 234

9 cultural differences, with the aim of explaining gender differences in cultural characteristics. Moor, et al. (2000) explains that there are cultural differences in the organization of the private sector with the public sector, so it must consider the organizational culture. Maskun (2009) explains that individuals are influenced by cultural characteristics that shape the individual up, so the consideration of local culture to test for gender differences is important to know the local values that predispose individuals to make ethical and moral considerations. COPY RIGHT 203 Institute of Interdisciplinary Business Research 235

10 References Adebayo, S.O. (2007). Effect of religiosity and occupation on moral reasoning: a study of a igeria adult sample. British Journal of Art an Social Science, 3(2): Blanchette, D., Pilote, C. dan Cadieux, J. (2002). Manager s moral evaluation of budgetary slack creation. raw/aaa/2002 annual/cpe/cpe3/b-2.pdf. Colby, A., L. Kohlberg, J. Gibbs, and M. Lieberman. (983). A longitudinal study of moral judgment. in Monographs of the Society for Research in Child Development,48 (series 200): 07. Dunk, A. S. (993). The effect of budget emphasis and information asymmetry on the relation between budgetary participation and slack. The Accounting Review. 4: Donenberg, G.R., dan Hoffman, L.W. (988). Gender differences in moral development. Sex Role, 8:/2: Douglas, P. C. dan B. Weir. (2000). Integrating ethical dimension into a model of budgeting slack creation. Journal of Business Ethics, 28: Eisenhardt, K. M. (989). Agency theory: an assessment an review. Academy of Management Review, vol. 4 : : Eweje, G. dan Bruton, M. (200). Ethical perceptions of business students in ew Zeland university: do gender, age and work experience matter?. Business Ethics: European Review, 9 (): 95- Forsyth, D. R. (992). Judging the morality of business practices: the influence of personal moral philosophies. Journal of Business Ethics. : Gilligan, C. (977). In a different voice: female's conceptions of self and of morality. Harvard Educational Review Ho, C., dan Redfern, K. A. (200). Consideration of the role of Guanxi in the ethical judgments of Chinese managers. Journal of Business Ethics, 96: Hobson, J. L., Mellon, M. J. dan Stevens, D. J. (20). Determinants of moral judgment regarding budgetary slack: an experimental examination of pay scheme and personal values. Behavioral Research in Accounting, 23(): Kohlberg. L. (969). Stage and Sequence: the Cognitive Approach to Socialization. In Goslin, D.A., ed. Handbook of socialization theory and research. Chicago: Rand Mcally. Lane, J.E. (2003). Management and Public Organization: the Principal-Agent Framework. University of Geneva and ational University of Singapore. Working paper. COPY RIGHT 203 Institute of Interdisciplinary Business Research 236

11 Lord, A.T., dan DeZoort, F. T. (200). The impact of commitment and moral reasoning on auditors responses to social pressure. Accounting, Organizations, Society. 26; Lovell, A. (997). Some thoughts on Kohlberg s hierarchy of moral reasoning and its relevance for accounting theories of control. Accounting Education, 6 (2): Lukka, K. (988). Budgetary biasing in organizations: theoretical framework and empirical evidence. Accounting, Organizations and Society, 3 (3): Maskun, A. (2009). Analysis of factors ethics, organizational culture, social pressures and the capacity of individuals to budgetary slack: study of executive behavior in the budgeting process in the Agency Coordinating Wilayahh II of East Java, Application Management Journal, 7 (2):62-72 Monga, M. (2007). Managers moral reasoning: evidence from large Indian manufacturing organization. Journal of Business Ethics, 7:79-94 Onsi, M, (973). Factor analysis of behavioral variables affecting budgetary slack. The Accounting Review. 48 (3): Ponemon, L. (992). Ethical reasoning and selection-socialization in accounting. Accounting, Organization, and Society: 7 (3/4): Ponemon, L. A. and Glazer, A. (990). Accounting education and ethical development: the influence of liberal learning to students and alumni in accounting practice. Issues in Accounting Education, 5(2): Richmond, K. A. (200). Ethical reasoning, machiavellian behavior, and gender: the impact on accounting students ethical decision making. Dissertation. Blacksburg, Virginia. Shaub, M. K., Find, D. W., and Munter, P. (993). The effects of auditors ethical orientation on commitment and ethical sensitivity. Behavioral Research in Accounting. 5: Stedham, Y., Yamamura, J. H., dan Beekun, R. I. (2007). Gender differences in business ethics: justice and relativist perspective. Business Ethics: A European Review, 6 (2): Stevens, E. D. (2002). The effect of reputation and ethics on budgetary slack. Journal of Management Accounting Research, 4: Tan, D. dan Sneel, R. S. (2002). The thir eye: exploring Guanxi and relation morality in the workplace. Journal of Business Ethics, 4; Weber, J. (990). Measuring the impact of teaching ethics to future managers a review, assessment and recommendations. Journal of Business Ethics, Yuhertiana, I. (20). A gender perspective of budgetary slack in east java governance. International Research Journals of Finance and Economics, Issue 78, 4-20 COPY RIGHT 203 Institute of Interdisciplinary Business Research 237

12 Appendix. Regression Analysis Results for Group (Men) Regression Variables Entered/Removed b Variables Variables Entered Remov ed Method X2, X a. Enter a. All requested v ariables entered. b. Dependent Variable: Y Summary b Adjusted Std. Error of Durbin- R R Square R Square the Estimate Watson.684 a a. Predictors: (Constant), X2, X b. Dependent Variable: Y Regression Residual Total a. Predictors: (Constant), X2, X b. Dependent Variable: Y AOVA b Sum of Squares df Mean Square F Sig a (Constant) X X2 a. Dependent Variable: Y Unstandardized Coeff icients Coefficients a Standardized Coeff icients Collinearity Statistics B Std. Error Beta t Sig. Tolerance VIF COPY RIGHT 203 Institute of Interdisciplinary Business Research 238

13 One-Sample Kolmogorov-Smirnov Test ormal Parameters a,b Most Extreme Dif f erences Kolmogorov-Smirnov Z Asy mp. Sig. (2-tailed) Mean Std. Dev iation Absolute Positiv e egativ e a. Test distribution is ormal. b. Calculated f rom data. Unstandardiz ed Residual Correlations Spearman's rho Abs_res X X2 Correlation Coef ficient Sig. (2-tailed) Correlation Coef ficient Sig. (2-tailed) Correlation Coef ficient Sig. (2-tailed) Abs_res COPY RIGHT 203 Institute of Interdisciplinary Business Research 239

14 Appendix 2. Regression Analysis Results for Group 2 (Female) Regression Variables Entered/Removed b Variables Variables Entered Remov ed Method X2, X a. Enter a. All requested v ariables entered. b. Dependent Variable: Y Summary b Adjusted Std. Error of Durbin- R R Square R Square the Estimate Watson.822 a a. Predictors: (Constant), X2, X b. Dependent Variable: Y Regression Residual Total a. Predictors: (Constant), X2, X b. Dependent Variable: Y AOVA b Sum of Squares df Mean Square F Sig a (Constant) X X2 a. Dependent Variable: Y Unstandardized Coeff icients Coefficients a Standardized Coeff icients Collinearity Statistics B Std. Error Beta t Sig. Tolerance VIF COPY RIGHT 203 Institute of Interdisciplinary Business Research 240

15 One-Sample Kolmogorov-Smirnov Test ormal Parameters a,b Most Extreme Dif f erences Kolmogorov-Smirnov Z Asy mp. Sig. (2-tailed) Mean Std. Dev iation Absolute Positiv e egativ e a. Test distribution is ormal. b. Calculated f rom data. Unstandardiz ed Residual Correlations Spearman's rho Abs_res2 X X2 Correlation Coef ficient Sig. (2-tailed) Correlation Coef ficient Sig. (2-tailed) Correlation Coef ficient Sig. (2-tailed) Abs_res COPY RIGHT 203 Institute of Interdisciplinary Business Research 24