Fairness and Incentive Contracting Based on the Performance Budget: Testing Experiment on Referent Cognition Theory

Suharli Manoma

Abstract: Based on the referential cognitive theory, this study examines the effects of fairness and incentive for individual performance in a not participative budgeting setting. An experimental design 2x2 between subject was conducted. Participants are as many as 88 students of the accounting program. Two way anova analysis is used to investigate hypothesis. The result shows as predicted by referent cognition theory. Performance was lowest when an unfair budget target assigned using an unfair budgeting process. When the budget target assigned was fair, the fairness or unfairness of the budgeting process had no effect on performance. When an unfair budget target was determined using a fair budgeting process, performance was not significantly different from the performance of the subjects assigned fair budget targets.

Keywords: Fairness, Referent Cognitions, Budgeting, Incentive Contracting

How to Cite?: Suharli Manoma, "Fairness and Incentive Contracting Based on the Performance Budget: Testing Experiment on Referent Cognition Theory", Volume 5 Issue 4, April 2016, International Journal of Science and Research (IJSR), Pages: 75-79, https://www.ijsr.net/getabstract.php?paperid=NOV162396, DOI: https://dx.doi.org/10.21275/NOV162396

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