Self-Efficacy

 

Bandura (1989); Mesch et al. (1994); and Philips et al. (1996) asserted that someone would react to the feedback received; and that the reaction depends on the desire to compare the gap between the feedback with the goals. Besides, the concept of Control Theory and Self-Efficacy Theory indicates that each individual's reaction and behavior to feedback may diverge according to the type of feedback they receive. In response to this matter, this study examined two types of feedback (positive and negative) that have not been explored by previous researchers.

Following Social Cognitive Theory, Wood and Bandura (1989) affirmed that the gap created by positive and negative feedback could increase or weaken motivation depending on self-efficacy. Consistent with this, Chong and Ferdiansah (2012) suggested that individual behavior is not only influenced by external factors, but also internal factors. Individual characteristics such as self-efficacy is vital predictors of individual motivation and behavior (Robertson and Sadri 1993; Nease et al. 1999; Olayiwola 2011). Self-efficacy is an assessment of an individual's ability to do something in a specific condition (Bandura 1977). 

Self-efficacy is needed in the context of budgetary slack because individuals assess their ability to create and achieve budget targets. This study investigated the self-efficacy variables that affect the relationship between feedback (positive and negative) and budgetary slack. Budgetary slack may arise due to asymmetric information between superiors and subordinates. Lau and Eggleton (2003) affirmed that information symmetry would not occur under real managerial conditions. Top management managers might set high work standards in order to produce higher productivity (Young 1985). 

However, subordinates will downplay their capabilities if they have private information about productive capabilities that are not known by their superiors. The situation indicates that budgetary slack arises from asymmetric information so that all hypotheses proposed are in asymmetric information.

Social Cognitive Theory states that individuals are operator agents who not only use brain activity in learning, but also consider other influences, such as future actions that are appropriate to the situation, predict the value to be gained, evaluate the effects of actions, and make changes if needed (Bandura 1999). The theory explains the psychosocial function in the triadic reciprocal causation model. The model contains a reciprocal causal relationship between three factors; namely, the environment can influence cognition, which further influences behavior (Bandura 1999). 

Behavior is an interaction of environmental and cognitive factors. Erez (1977) also states that the interaction function between individual factors and the environment is a behavior that is often called as selfefficacy. Feedback can enter into environmental factors and interact with self-efficacy and further influence the behavior of budgetary slack. Control Theory emphasizes reducing the discrepancy between objectives and negative feedback (Philips et al. 1996), which might have a different impact on individuals. Individuals with high selfefficacy are more likely to produce less effort than individuals with low self-efficacy (Philips et al. 1996; Sitzmann and Yeo 2013). 

The possible reason in that because individuals with high self-efficacy possess more optimistic perceptions of performance so that they will reduce effort and time resources (Carver and Scheier1990; Vancouver et al. 2001, 2002, 2005, 2014; Schmidt and DeShon 2009). In the context of budgetary slack, managers who have high self-efficacy will reduce their efforts and standards if they get negative feedback (Klunger and DeNisi 1996) as the perceived gap between the feedback received and the objectives to be achieved is getting below the standard. The individual will reduce his standards and efforts when getting unpleasant feedback. The reduction of business standards is made by lowering an easily attainted budget target; hence the potential budgetary slack becomes even more significant. 

Self-Efficacy Theory stresses the sustainability of making a gap when there is a match between the goal and the feedback it receives, in this case, positive feedback. Positive feedback indicates that someone has reached or exceeded the goal. Individuals with high self-efficacy will increasingly improve their goals and performance when they receive positive feedback, compared to individuals with low self-efficacy (Bandura 1977; 1999). 

Managers with high self-efficacy will increase their business if they get positive feedback as the gap between the feedback received and the goals are getting smaller. The manager is more likely to increase his business by setting higher standards and will not lower his budget targets. Therefore, managers with high self-efficacy and get positive feedback favor to minimize the potential for budgetary slack.