Investigating the Influence of Honesty and Conscientiousness on Reporting Accuracy in Participative Budgeting

Abstract: This study investigates participative budgeting and explores the influence of managers’ individual personality traits of honesty and conscientiousness on the accuracy of their disclosure of private budgeting information. The study is grounded in the principal agent framework. A behavioral economics experiment was conducted using a modified trust contract design in a laboratory setting. Participants were assigned to three compensation conditions (fixed wage, individual incentive, and group incentive) and completed budgeting tasks across multiple rounds. The agents’ personal trait of honesty was not a significant predictor of accurate information reporting in the fixed wage condition but showed marginal significance in the incentive conditions. Conscientiousness was negatively correlated with accuracy in the fixed wage and group incentive conditions but not in the individual incentive condition. The findings suggest that personality traits influence accurate managerial reporting, but their effects are situational. These results have implications for organizational behavior theory and managerial practices related to budgetary control and ethical decision-making.

Key words: participative budgeting, personality traits, managerial reporting, honesty

JEL codes: D82, D86, D91, M52