Creating Slack in budgets an empirical analysis of Anglo-American and Libyan companies operating in Libyan oil sector

Abstract

The phenomenon of inflating discretionary budgets has negative effects on the organization's performance because it leads to distortions in the process of distributing economic resources within the organization. Often, when management is involved in the process of preparing discretionary budgets, the process of inflating discretionary budgets is low. In “collectivistic” societies, the personal interest of individuals is transformed into the interest of the group. Therefore, the process of inflating discretionary budgets for personal goals comes after taking care of the interests of the group. This study used Hofstede's (2005) “individualism-collectivism” approach. A quantitative approach was applied to determine the difference between Libyan companies and Anglo-American companies operating in the Libyan oil sector in terms of inflating discretionary budgets. Data was collected by questionnaire to test the hypothesis. The results provide empirical evidence that the “individualism-collectivism” dimension has no effect on discretionary budget inflation behavior as hypothesized. Although inflating discretionary budgets is linked to rewards for achieving the goals of these budgets. However, this is not the case in the Libyan oil sector. The study also contributes to enriching previous research by concluding that inflating discretionary budgets in the Libyan oil sector is not affected by the cultural dimension of “individualism - collectivism.”