The Mediating Effect of Psychological Capital on the Budget Participation-Job Performance Relationship

ABSTRACT This study draws from the literature in positive psychology and organizational behavior to examine the role of an individual's psychological capital (PsyCap) on the budget participation-job performance relationship. PsyCap is an emerging construct that represents an individual's positive state of psychological development, and is characterized by the individual's hope, efficacy, optimism, and resiliency. We surveyed 109 employees working in organizations across the United States who are actively involved in the budget-setting process or have budgetary responsibilities. The results of a mediation analysis show that budget participation is significantly and positively associated with employees' levels of PsyCap, which is in turn significantly and positively associated with higher levels of job performance. Supplemental analysis using a structural equation modeling technique also supported the hypotheses of this study.