Why do not people create slack? An explanation from moral reasoning to mitigate social pressure effect

Purpose The purpose of this paper is to examine the role of moral reasoning in mitigating social pressure on budgetary slack creation. Design/methodology/approach An experimental study with a 2 × 2 factorial design was conducted for this research. Social pressure is divided into two groups (high social pressure and low social pressure), and moral reasoning is categorized into high moral reasoning and low moral reasoning. This study involved 70 undergraduate accounting students as participants. Additional interview was conducted after the experiment test to reach a deep understanding of participants’ reason for joining an experiment. Findings This research shows that people under high social pressure tend to do budgetary slack than people under low social pressure. This study also found that moral reasoning moderates social pressure on budgetary slack creation. Furthermore, people under high social pressure and low moral reasoning tend to do a budgetary slack more than those under low social pressure and high moral reasoning. Each person’s level of moral reasoning determines how they will respond to the ethical dilemmas brought by social pressure, which in turn affects their choices. Originality/value This study showed how moral reasoning is vital in minimizing social pressure’s effect on budgetary slack. This study used the psychological reactance theory to explain how some people in under-pressure situations try to ignore it and make the right decision.