Supervisors: Thomas Fisker Toldbod & Thomas Borup Kristensen
Discussants: Morten Møller Poulsen & Bart Verwaeren

Abstract
Considering rising employee stress levels, understanding how budgeting practices contribute to the mental health crisis is increasingly important. We study the clinical stress impact of dysfunctional budgeting cultures, characterized by manipulation, gaming, and pressure to misreport in interaction with budget-based performance evaluation. We argue that dysfunctional behaviour creates internal moral conflict among employees, which increases employee stress levels when paired with the accountability mechanisms of budget-based performance evaluation. Drawing on survey data from 246 companies and objective stress data from their 92,000 employees, we find that the interaction between the two aspects significantly elevates employee stress levels. Crucially, we distinguish between managers, who often shape or benefit from dysfunctional actions, and non-managers, who are evaluated based on them. Our findings show that non-managers are significantly more stressed by the interaction between budget-based performance evaluation and dysfunctional budgeting culture, highlighting the unequal emotional burden created by hierarchical budgeting systems. These results underscore the importance of examining both cultural dysfunction and role-based asymmetries when evaluating the psychological consequences of budgeting.

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