Management Accounting Studies Research Articles

The changing role of management accounting systems towards value creation

Value concepts with a multi-stakeholder approach in the management accounting field are the subject of recent interest. The most popular management accounting conceptions, namely, activity-based costing (management) and balanced scorecard, reveal how the changed management accounting role integrates a focus on three key stakeholder groups: employees, customers and shareholders. Built on previous management accounting studies, this article explores when the management accounting system ensures value creation. The relationship between value creation and the management accounting system were disclosed using the multistakeholder theoretical approach. Research methods adopted in this study are empirical survey and empirical field study. The implementation level of modern management accounting conceptions was analysed using quantitative data (survey). Deeper analysis was performed in a Lithuanian organisation disclosing relationships between value creation and the implementation level of management accounting conceptions (case study). The results of the research revealed that modern management accounting conceptions might be a precondition for the changing role of management accounting but it depends on the implementation level and the organisation’s ability to manage all capacities of these conceptions.

Fairness of performance evaluation procedures and job satisfaction: The role of outcome‐based and non‐outcome‐based effects

Prior management accounting studies on fairness perceptions have overlooked two important issues. First, no prior management accounting studies have investigated how procedural fairness, by itself, affects managers’ job satisfaction. Second, management accounting researchers have not demonstrated how conflicting theories on procedural fairness can be integrated and explained in a coherent manner. Our model proposes that fairness of procedures for performance evaluation affects job satisfaction through two distinct processes. The first is outcome‐ based through fairness of outcomes (distributive fairness). The second is non‐outcome‐based through trust in superior and organisational commitment. Based on a sample of 110 managers, the results indicate that while procedural fairness perceptions affect job satisfaction through both processes, the non‐outcome‐based process is much stronger than the outcome‐based process. These results may be used to develop a unified theory on procedural fairness effects.

Changing Role of Management Accounting: Lithuanian Experience Case Studies

The preconditions of knowledge economy have influenced global changes, which, consequently, had an impact on the nature of organizational equity. Furthermore, a dynamic and competitive climate urges managers to perfect their skills in global orientation, strategic flexibility and quick response to changes as a prerequisite of working under ever-transforming conditions, where an organization should be in the state of continuous development, responding to new technologies, new markets, new businesses, and new people (employees and consumers). The above-mentioned business environment and information access alternate the nature of market competition as well as determine particular information demand. Quick response and flexibility could be achieved, only if decisions are based on timely and adequate information, knowledge and experience in managing the external business environment and internal capacities of an organization. Thus, the new measurement tools are in demand, which should assist in measuring, planning, evaluating and managing the value-creating process inside the organization. The role of modern management accounting systems has extended from data accumulation to strategy implementation. The most popular management accounting conceptions, namely, activity based costing (management) and balanced scorecard, disclose how changed management accounting role integrates a focus on three key stakeholder groups: employees, customers and shareholders. Built on previous management accounting studies this article explores Lithuanian experience implementing modern costing and performance measurement systems. In order to point out the changing role of management accounting in Lithuanian organizations an empirical research was performed. This research consists of two main stages. 1) Implementation level of modern management accounting conceptions and the availability of information for decision making were analyzed using quantitative data (survey). 2) A deeper analysis was performed in Lithuanian organization disclosing the changing role of management accounting after implementation of modern costing and performance measurement system (case study). Results of empirical research indicate that there is quite a strong correlation between implementation level of conceptions (ABCM and / or BSC) and a range of management areas where information generated with the help of those conceptions is useful. Case study organization has started integration stages and has created information basis for cross functional and vertical communication through different management levels, but meanwhile there is an absence of communicative relations between top and lower management levels. The results of the research disclosed that modern management accounting conceptions might be precondition for changing role of management accounting but it depends on implementation level and organization’s ability to manage all capacities of these conceptions.

Networked Organizations: A Strategic Cost Management Perspective

Networked organizations are receiving increasing attention in the management literature because of their perceived success in terms of fast growth, increased flexibility and efficiency of operations, lower overhead costs, and effective competitive positioning. For all firms, the choice of which activities to perform internally and which to outsource is a critical issue. Cost information can play a fundamental role in the decision about how much market and how much hierarchy. Indeed, outsourcing is, basically, a cost and benefits evaluation. Management accounting and strategic management studies have, so far, not addressed this perspective explicitly. Management accounting is too internally focused on the costs of the firm rather than the entire supply chain. The strategic management perspective, on the contrary, focuses its attention on the supply chain, but only deals very generally with those transaction costs which emerge in using the market. Both approaches fall short in providing a well articulated financial rationale for which activities should be outsourced and which should be entrusted to the market. Neither approach does much to help managers understand where value is created in the value chain, the costs of the activities involved or their cost drivers. Strategic cost management (SCM) studies provide a useful cost analysis framework which is too often missing in the strategic decision making process. Competitive analysis, value or supply chain mapping, and cost driver analysis are, in particular, the tools of SCM. The aim of this paper is to apply SMC to the theory of networked organizations. In this paper we will use SCM to explain the Italian motor bike industry where both vertically integrated and network organizations exist. In particular, we will try to interpret different firms performance by comparing their value chains and their positions along the value system. The financial impact of the complexity involved in these different organization models and its impact on profitability and competitive position is our main theme.

Overcoming the subjective–objective divide in interpretive management accounting research

Methodological debates in accounting frequently emphasise the distinction between objective and subjective research. A growing body of interpretive management accounting studies, often based on fieldwork, is continuing to develop approaches that seek to overcome that distinction by exploring the various ways in which accounting can become part of the contexts in which it operates.

The role of management accounting in corporate social responsibility measures: experience with the financial services industry

Recent management accounting (MA) studies demonstrate the need for multi-dimensional performance, specially non-financial performance (NFP) measures. Contemporary academics and practitioners have also demonstrated that measuring/managing NFP in service organisations is more challenging than in manufacturing organisations. However, not a single study of the role of MA in measuring corporate social responsibility (CSR) in the financial services industry (FSI) has yet been reported, although CSR is an important element of NFP. This study attempts to investigate the role of MA in measuring CSR in various financial institutions in Finland, Sweden and Japan. The results of this study reveal that the management of the studied organisation put more emphasis on financial performance measurement and comparatively less on NFP measurement. CSR is considered important in some banks, but MA plays a relatively small role in the measurement of these elements. The empirical findings of this study point to areas for future research.

Revisiting the Value of Repeated Contacts on Survey Response Rates in Management Accounting Research: Research Note

The aim of this study is to examine the use and effect of repeated contacts on mail-survey response rates in management accounting research. The use of repeated contacts such as prenotification or follow-up is one highly recommended means to increase response rates. However, there is very little theory behind this recommendation and the empirical evidence reveals some contradictions. This study starts by documenting the use and effect of such techniques on response rates in extant management accounting research. Second, we conduct an experiment to examine the individual and combined influence of prenotification and follow-up on response rates. Our analysis of the literature from 1985 to 2004 and experimental evidence reveal that repeated contacts do not systematically increase response rates. Our analysis suggests that there is a need to better understand when, why, and how repeated contacts are expected to influence response rates as well as their potential benefit in management accounting studies.

Environmental costs at a Canadian paper mill: a case study of Environmental Management Accounting (EMA)

An Environmental Management Accounting (EMA) framework is applied to the 2000 year-end financial report for the Mackenzie Paper Division paper mill owned and operated by Abitibi-Consolidated Inc. of Montreal, Quebec. A conventional reading of the obvious environmental costs from this financial report is Cdn$2,196,838. This figure is derived from an analysis of effluent treatment costs and other line item environmental costs. There is no “environmental account” category that breaks out either costs or the mass balance of inputs and outputs. For the most part, environmental costs are rolled up into overhead accounts such as administration, infrastructure and materials accounts. Application of the EMA framework is based on assigning environmental costs to one of four categories for which a tentative breakdown is as follows: (1) waste and emission treatment costs ($3,348,902); (2) prevention and environmental management costs ($270,109); (3) material purchase value of non-product output costs ($946,799); and (4) processing costs of non-product output ($2 92,943). There is also a category called Environmental Revenues, of which none were reported. Conservative estimates thus place the total environmental costs at $4,858,753. What is significant about this result is that the environmental costs under EMA are at least twice as much as would normally be reported. This supports the view that environmental costs are much higher than generally considered and makes it clear that many important environmental costs as well as benefits are “hidden” in other accounts. More studies of a similar design are required to confirm the validity of the EMA methodology reported here.

Proposition d'un cadre conceptuel d'analyse des jeux d'acteurs cristallisés dans et par les outils de contrôle

Dans le champ du contrôle de gestion, les recherches académiques comme les pratiques managériales sont alimentées par deux courants. Si le premier se focalise sur les instruments du contrôle de gestion, le second privilégie l’étude de l’impact du contrôle sur les individus et les groupes. En fusionnant ces deux dimensions, l’objectif de l’article est de dépasser l’approche technicienne qui trop souvent conçoit les outils de contrôle comme des objets neutres déconnectés des acteurs pour lesquels et par lesquels ils ont été forgés. Pour ce faire, un cadre conceptuel d’analyse, dans lequel les jeux d’acteurs sont perçus comme étant immanents aux outils de contrôle, est proposé. Cette perspective théorique originale, confrontée à l’épreuve des faits dans le contexte d’une recherche-action, devrait permettre d’améliorer la compréhension des processus d’activation des outils de contrôle de gestion.

Controllers' Protoscripts and the Shaping of Control

The control mechanisms and instruments that eventually emerge in an organization are the result of a number of interrelated factors and processes. The design and construction of control instruments, the communication about them, the way in which the instruments are actually used, the processes of institutionalization that lead to the procedures and routines that are eventually entrenched in an organization, and processes of accounting change are just a few examples hereof. Of special interest to us is the behaviour of management accountants and controllers in the shaping of control. Accountants and controllers are not only of importance in the shaping of control mechanisms themselves. It is also in their best interest that the control mechanisms they design, develop and alter are actually used in a firm and function properly. Furthermore, it is part of a controller's core-business to handle the link between management information and accounting and control change. When studying the link between the behaviour of accountants and controllers and the institutional environment of a firm, it may be hypothesized that institutions both arise from and constrain social action, and that day-to-day operations involving institutions can be regarded as 'scripts'. Scripts describe observable, recurrent activities and patterns of interaction characteristic of a particular setting. Ultimately, scripts may become institutionalized in a firm. There is probably a greater tendency for the institutionalization of stereotypical behavioural patterns than for atypical patterns, since the latter are not common in an organization. Scripts may therefore be a useful tool to study how the institutionalization of accounting processes (which by definition involve stereotypical behaviour) comes about. In this paper, we describe the procedure and outcome of the collection of a group of so-called behavioural scripts that management accountants and controllers apply in various types of problem situations. Through the use of a variety of interview techniques we could find several patterns of action that controllers deem stereotypical in the shaping of control. We find that in order to get an idea how the institutionalization of accounting processes and instruments actually takes place in an organization - a topic that is as of yet (almost) unexplored in management accounting studies although it is attracting more and more attention, the discovery of scripts is an important first step.

Accountingization v. legitimation: a comparative study of the use of accounting information in intensive care

This is a comparative study of management accounting in intensive care units in the UK and Finland. The management accounting problems of health care in many countries are well documented in the literature (difficulties of budgetary implementation: non-integration of health care professionals into the financial management process). This study examines these issues in the situation of intensive care, where there are difficult ethical decisions to be made by health care professionals in a climate of rapid medical advance where financial constraints may lead to rationing of health care. This paper reveals commonalities between these two countries in terms of intensive care problems, but there are differences, too, which can be attributed to contrasts in management accounting practices in the two countries.

The relationship between learning approaches and learning outcomes: a study of Irish accounting students

The higher education literature demonstrates that a student's approach to learning is a critical factor in determining the quality of the learning outcome. This is the first study undertaken in an Irish context which examines the relationship between accounting students' approaches to learning and their learning outcomes. The Approaches and Study Skills Inventory for Students (ASSIST) is used to measure the approaches to learning adopted by first year students in their study of management accounting. Students' learning outcomes are represented by their performance in the various assessment components of that module. Gender differences are specifically considered in this study. The analysis reveals that for the full group the deep and strategic approaches are positively associated with high academic performance and the instrumental approach is associated with poor performance. This relationship exists for female students but, surprisingly, there is little evidence of a relationship between performance and learning approaches for male students. This may be explained by male students failing to effectively report their actual approach to learning.

Management accounting and the challenge of strategic focus

The paper presents a case study of management accounting in a company that had been a highly diversified conglomerate but was implementing a new strategy of product market focus combined with a more multinational scope. Formerly subject to a simple but rigorous form of financial control, the new organizational identity of becoming a high-growth, high-technology company posed fresh challenges for its control style and, in particular, for the role of management accounting. The paper draws on self-referential systems theory in order to analyse the paradox that while an organization can become more focused on particular markets and technologies, its management accounting seems to become more diffuse and differentiated. As the company sought to develop a different corporate epistemology through the reproduction of a fresh identity, it established new forms of corporate communication through its quality and performance management systems. Autopoietic theory would acknowledge that management accounting should provide some system guidance but would warn against the possible danger that some forms of performance control may damage company self-production.

Accounting, management and organizational change: A comparative study of local government

This is a study of management accounting in local government in the context of significant change (managerial, organizational and environmental). The study is based on four case studies: two in Scotland and two in New Zealand. The paper explores two competing theories of organizational life—the instrumental view as espoused by New Public Management proponents, and the socially constructed, as advocated by new institutional theorists. This study locates management accounting at the centre of these changes in New Zealand with a more limited role in the U.K. where there is evidence of institutional isomorphism.

A Comparative Study of Business Management and Management Accounting between Foreign Companies in Japan and Japanese Counterparts in Asia (<Special Issue>Accouting,Information and Organization)

A Comparative Study of Business Management and Management Accounting between Foreign Companies in Japan and Japanese Counterparts in Asia (<Special Issue>Accouting,Information and Organization)

Never mind the gap: towards an institutional perspective on management accounting practice

The message of this paper is that researchers should not become unduly concerned about comparisons of management accounting practice against theoretical 'ideals'. Rather, they should focus more closely on the study of management accounting practice per se. The paper outlines some of the challenges to mainstream economics, and particularly to neoclassical theory which forms the basis of management accounting's conventional wisdom. It then outlines alternative institutional economic approaches, distinguishing between 'new' institutional economics which has developed as an extension of neoclassical theory and 'old' institutional economics which developed in opposition to neoclassical analysis. It is argued that the latter, old institutional economics, is a potentially useful framework for the study of management accounting practice.The institutional framework sketched out in the paper views accounting practices as institutionalized routines which enable organizations to reproduce and legitimate behaviour, and to achieve organizational cohesion. It is argued that accounting as institutionalized routine creates understandings of activities according to particular sets of accounting rules and procedures which enable decisions to be made and activities undertaken in a complex and uncertain world. This institutional framework is offered as a possible starting point for management accounting case studies. It encourages researchers to look seriously at the nature of all management accounting practices, and not to dismiss those practices which do not conform to some theoretical ideal.

Purposes and paradigms of management accounting: beyond economic reductionism

Neo-classical economics does not of itself provide an adequate explanation of current management accounting practice and research. Ideas from several other disciplines have been used in an attempt to facilitate a more complete understanding of management accounting. There now exists a multiplicity of ‘ways of seeing’ management accounting which adds richness to the literature. This paper first describes a number of the current theoretical-paradigmatic approaches, and then offers a typology for understanding them. It is suggested that each of these schools has different insights to offer the study of management accounting and that attempts to privilege one school over another should be avoided. Management accounting is seen as fulfilling a multiplicity of purposes which can only be understood by analysing the actions of the management accounting actors involved.