The Effect of Participatory Budgeting on Budget Risk Avoidance, Budget Slack and Organizational Performance Accountability
Abstract
This study aims to analyze the role of participatory budgeting in influencing budgeting risk, budgetary slack, and organizational performance accountability. Budgeting is a fundamental management tool that functions as a mechanism for planning, coordination, supervision, performance evaluation, and motivation. However, the involvement of multiple parties in the budgeting process creates both opportunities and challenges. While participatory budgeting enhances transparency, information quality, commitment, and motivation, it may also trigger dysfunctional behaviors such as budgetary slack, information asymmetry, and conflicts of interest. Using a deductive qualitative approach based on literature review, this article examines the behavioral aspects of budgeting, agency theory perspectives, and the ethical implications of budgetary slack. The findings indicate that participatory budgeting can improve performance accountability by increasing ownership, strengthening organizational commitment, and reducing budget variance. Nevertheless, excessive or poorly managed participation may increase budgeting risks, including inaccurate cost estimates, operational risks, financial risks, and opportunistic behavior. Risk aversion and information asymmetry are identified as key factors contributing to the emergence of budgetary slack. The study concludes that participatory budgeting positively affects managerial performance and organizational accountability when supported by ethical standards, transparency, strict supervision, and effective coordination. Properly managed participation can reduce budgeting risk and minimize budgetary slack, thereby improving efficiency, strengthening governance, and enhancing organizational performance.
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