Do non-financial performance and accrual-based cost information affect public sector budgeting?

Purpose: This study aims to provide evidence of how budget officers use non-financial and accrual-based cost information in the budgeting process and how the usage of this information is influenced by financial constraints. Design/methodology/approach: A randomized survey-based field experiment investigating budget officers in 546 Japanese local governments (LGs) was conducted. This allowed us to identify the budget officers' decision-making in the public sector budgeting process by creating and analyzing primary data with regression models. Findings: We found that budget officers suppress budget amounts based on non-financial information of good performances. Under fiscal constraints, officers further reduce budget amounts using information on high accrual-based costs and poor non-financial performance. Originality/value: Our survey-based field experiment allowed us to obtain primary data from officers making budget decisions. To the best of our knowledge, this study provides the first evidence that non-financial good and poor performance information and accrual-based cost information affect budget officers' decision-making under financial constrain.