THE ROLE OF BUDGETARY SLACK IN MANAGERIAL DECISION-MAKING: HOW COMPANIES INTENTIONALLY UNDERSTATE REVENUES OR OVERSTATE EXPENSES TO GAIN STRATEGIC FLEXIBILITY

This study explores the role of budgetary slack in managerial decision-making, specifically how companies manipulate budgets by underestimating revenues or overstating expenses to gain strategic flexibility. The research aims to examine the impact of budgetary slack on financial performance, corporate governance, and long-term business sustainability from 2012 to 2016. Using secondary data from industries like financial services, manufacturing, and technology, the study employed descriptive statistics, T-tests, Chi-square tests, and regression analysis. Findings indicate that while budgetary slack provides short-term profitability benefits by allowing firms to manage unforeseen costs, it does not significantly affect overall profitability in a statistically meaningful way. Additionally, companies with strong governance structures are less likely to engage in slack, which highlights the importance of governance in mitigating its adverse effects. The study concludes that while slack can serve as a tool for financial flexibility in volatile markets, its long-term impact on efficiency and transparency is questionable. The research recommends that firms balance the strategic use of budgetary slack with strong governance practices and suggest regulatory bodies enforce clearer guidelines to minimize its misuse.