Assessing behavioural determinants of budgetary slack among heads of departments in local government of Malaysia

Efficient and prudent allocation and utilisation of public funds have been major concerns in the public sector. The Malaysian Auditor-General’s report consistently highlights issues related to expenditure mismanagement, particularly overspending, underutilisation, and the bunching of public funds that have persisted over the years. In response to these concerns, this study aims to investigate the psychological factors that influence individuals to engage in budgetary slack. The Theory of Planned Behaviour (TPB) and Self-Control Theory (SCT) are utilised to explore the relationships between these factors and to develop a comprehensive research framework. Specifically, this study extends the TPB by introducing three additional variables: moral obligation, self-efficacy, and peer influence, alongside the original constructs of TPB, which include attitude, subjective norms, and perceived behavioural control. The study further examines the mediating effect of intention and the moderating role of self-control. A correlational cross-sectional study was conducted using a proportionate stratified random sampling technique involving a sample of heads of departments (n = 350) selected from local governments in Peninsular Malaysia, achieving a response rate of 78% (273/350). Data were collected through a self-administered questionnaire using an online platform (Google Form). Partial least squares structural equation modelling (PLS-SEM) was employed as the primary statistical method for data analysis. The results reveal that attitude, subjective norms, perceived behavioural control, moral obligation, peer influence, and self-efficacy have a significant impact on intention. However, only attitude and intention were found to have a significant effect on budgetary slack. Additionally, intention was shown to play a significant mediating role in this study, while self-control was found to moderate the relationship between intention and budgetary slack. Overall, the findings indicate that the model offers a robust understanding of the psychological factors influencing the creation of budgetary slack among heads of departments in local governments in Peninsular Malaysia. This study contributes to the financial management literature by validating the extended TPB as a reliable predictor of budgetary slack behaviour. The results also offer practical recommendations for the Local Government Department, Ministry of Local Government Development, Ministry of Finance, and the National Audit Department in designing policies and control mechanisms to mitigate inefficiencies in budget management. Lastly, the study identifies opportunities for future research, suggesting that other contexts and variables should be further explored.