Theory question based on budgeting for financial planning.
If budget performance is overemphasized, myopic behavior can occur where a manager takes actions that improve budgetary performance in the short run but cause long-run harm to the firm.
Required:
a. Give two examples of myopic behavior that might be encouraged if there is an overemphasis on budgets as a performance measure.
b. Identify and discuss the key features that a budgetary system should have to encourage managerial, goal-congruent behavior .