Abstract
This
study examined the impact of management accounting techniques on decision
quality, resource allocation efficiency, and risk management effectiveness in
listed manufacturing companies in Nigeria. A survey research design was
employed, with a sample size of 391 respondents drawn from the population study.
Data were collected through a structured questionnaire based on a 5-point
Likert scale, which allowed for the measurement of respondents' perceptions and
experiences regarding the application of management accounting techniques such
as budgeting, variance analysis, and forecasting. The collected data were
analyzed using SPSS 27, with multiple regression analysis employed to evaluate
the relationships between management accounting practices and the study’s key
variables. ANOVA estimates were also used to test the hypotheses posited in the
study. The findings revealed a significant positive relationship between the
application of management accounting techniques and the improvement of decision
quality, resource allocation efficiency, and risk management effectiveness in Nigerian-listed
manufacturing companies. Specifically, the results indicated that companies
utilizing management accounting techniques, including budgeting, variance
analysis, and forecasting, were able to make more informed decisions, allocate
resources more efficiently, and better manage risks, which ultimately
contributed to improved corporate performance and sustainability. These
findings highlighted the critical role of management accounting practices in
enhancing financial decision-making and strategic planning, particularly in
dynamic and challenging business environments like Nigeria. In conclusion, the
study emphasized the importance of adopting systematic management accounting
techniques in Nigerian companies to foster transparency, accountability, and
efficiency. It was recommended that companies invest in training their
management teams and staff on these techniques, as well as improve their
accounting systems to incorporate best practices. The study also highlighted
the need for further research to investigate the long-term impact of these
techniques on organizational performance and to explore how leadership and
organizational culture influence their effectiveness. This study contributes to
the existing body of knowledge by offering empirical evidence on the
relationship between management accounting techniques and organizational
outcomes in Nigeria, providing a foundation for future research in this area.
It also offers practical recommendations for companies looking to improve their
financial and operational performance through the adoption of robust management
accounting practices.
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4
Research Questions
1.5 Research Hypothesis
1.6 Justification of the Study
1.7 Scope of the Study
1.8 Significance of the Study
1.9 Operationalization of Variables
1.10 Conceptual
Definition of Terms
CHAPTER
TWO
REVIEW OF LITERATURE
2.1. Conceptual Review
2.1.1. Management Accounting Techniques
2.1.1.1 Budgeting
2.1.1.2 Variance
Analysis
2.1.1.3 Forecasting
2.1.2. Organizational
Decision-Making
2.1.2.1 Decision Quality
2.1.2.2 Resource
Allocation Efficiency
2.1.2.3 Risk management effectiveness
2.2. Theoretical Review
2.2.1. Contingency
Theory
2.2.2. Institutional Theory
2.2.3 Behavioral
Theory of the Firm
2.3.4 Stakeholder
Theory
2.2.5. Theoretical
Framework
2.3. Empirical
Review
2.3.1. Management Accounting Techniques and Decision
Quality
2.3.2 Management Accounting Techniques and Resource
Allocation Efficiency
2.3.4. Management Accounting Techniques and Risk Management
Effectiveness
2.5. Gaps in literature
2.6 Researcher’s Conceptual Model
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1 Research Design
3.2 Population of the Study
3.3 Sample and Sampling Techniques
3.4 Method of Data Collection
3.5 Validity
of Instrument
3.6 Reliability of Instrument
3.7 Method of Data Collection
3.8 Method of Data Analysis
CHAPTER FOUR
DATA ANALYSIS, RESULTS AND
DISCUSSION OF FINDINGS
4.1 Analysis
of Respondents' Demographic Information
4.2 Analysis
of Respondents' Questions Decision Quality, Resource Allocation Efficiency, and
Risk Management Effectiveness
4.3 Test of Hypotheses
4.3.1 Test of Hypothesis 1
4.3.1.1 Discussion of Hypothesis 1
4.3.2 Test of Hypothesis 2
4.3.2.1 Discussion of Hypothesis 2
4.3.3 Test of Hypothesis 3
4.3.3.1 Discussion of Hypothesis 3
4.3.4 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
5.1.1 Summary of Empirical Findings
5.1.2 Summary of Theoretical Findings
5.2 Conclusion
5.3 Recommendations
5.4 Contribution to Knowledge
5.5 Limitations of the Study
5.6 Suggestions for Further Studies
References
Appendix: Questionnaire
LIST OF TABLES
Table 2.1
Summary of Empirical Review
Table 3.1: Target Population
Table
4.1: Demographic Distribution of Respondents
Table
4.2: Responses on Budgeting (BUDG)
Table
4.3: Responses on Variance Analysis (VA)
Table
4.4: Responses on Forecasting (FC)
Table
4.5: Responses on Decision Quality (DQ)
Table
4.6: Responses on Resource Allocation Efficiency (RAE)
Table
4.7: Responses on Risk Management Effectiveness (RME) (N = 391)
Table 4.8: Descriptive
Statistics of Management Accounting Techniques on Decision Quality,
Resource
Allocation Efficiency, and Risk Management Effectiveness
Table
4.9: Correlation Matrix for Management Accounting Techniques and Key Variables
Table 4.10:
ANOVA Estimates for the Effect of Management Accounting Techniques on
LIST OF FIGURE
Figure 2.1: Researcher’s Conceptual Model
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
Management accounting has evolved significantly over the
past few decades, transitioning from traditional practices focused primarily on
historical cost data to more dynamic approaches that integrate both financial
and non-financial information for decision-making. This evolution is largely
driven by the need for organizations to remain competitive in increasingly
complex markets. Modern management accounting techniques (MMATs) encompass a
variety of tools and methodologies, such as activity-based costing (ABC),
balanced scorecards (BSC), and performance measurement systems, which
facilitate strategic planning and operational control (Ebinaso & Ukwunna,
2022).
Management accounting techniques equip organizational
managers with critical information to make informed decisions and address
constantly changing business conditions, such as order backlog, capacity
utilization, and sales performance. Analytical reports also assist in
identifying issues like declining profitability, shrinking market share, and
disruptions in customer loyalty. In practice, management accounting involves
comparing actual results with planned outcomes or benchmarks, enabling managers
to adjust strategies proactively. As D. Colin (2000) defines it, management
accounting is "the process of identifying, measuring, and communicating
economic information to permit informed judgments and decisions by users of the
information." This role spans essential managerial functions, including
planning, organizing, leading, and controlling.
Planning activities in management accounting typically
involve tools such as budgeting, standard costing, target costing, and
cost-volume-profit (CVP) analysis. Process reengineering, just-in-time (JIT)
inventory systems, ABC, and value chain analysis are often employed to optimize
operations. Meanwhile, tools like total quality management (TQM), BSC, and
benchmark analysis are integral for leading and controlling organizational
performance. These methodologies enable managers to drive efficiency,
innovation, and value creation while maintaining alignment with organizational
objectives.
Management processes, which include planning, organizing,
staffing, leading, and controlling, are supported by these techniques.
According to Brech (2010), management is "a social process entailing
responsibility for the effectiveness and economic planning and regulation of an
enterprise in fulfillment of a given purpose or task." This process involves
making judgments and decisions based on data, guiding personnel, and
integrating activities to achieve organizational goals. Despite the growing
complexity of decision-making, reliance on intuition often persists, though
scientific approaches enabled by management accounting can lead to superior
outcomes (Brech, 2010).
Traditional management accounting techniques, such as
absorption costing and marginal costing, have limitations in their
applicability to modern business contexts. Dugdale and Jones (2002) argue that
these methods often fail to accurately allocate costs, reducing their
effectiveness for sound decision-making. This limitation has driven the
adoption of advanced methodologies, such as ABC, which provides more precise
cost attribution by identifying activities that drive costs.
Despite advancements, certain practices, such as the use of
discounted cash flow (DCF) analysis and internal rate of return (IRR)
calculations for decision-making, remain underutilized by many organizations
(Ittner & Larcker, 2001). This underuse indicates a need for broader
adoption of comprehensive management accounting methods to enhance
organizational decision-making capabilities.
Management accounting is widely perceived as providing
relevant information for both short-term and long-term decision-making. For
short-term decisions, tools like CVP analysis and customer profitability
analysis are effective. For long-term decisions, strategic tools like
investment appraisal techniques, including DCF and IRR, are essential. Dahal et
al. (2020) emphasize that adopting proper management accounting techniques is
critical for fostering efficient and effective business operations, ultimately
improving organizational performance. Financial managers, for example, must
implement techniques to carefully manage operating costs and achieve strategic
objectives (Chow et al., 2019).
Additionally, management accounting information plays a
vital role in monitoring strategic plans and ensuring work completion, thereby
directly contributing to organizational performance (Alabdullah, 2019).
Empirical studies confirm a positive relationship between the use of advanced
management accounting techniques and improved organizational outcomes (Madhoun,
2020; Al-Dweikat & Nour, 2018). However, existing research has not
extensively explored the mediating role of accounting information quality in
the relationship between management accounting techniques and decision-making.
Accounting information quality significantly influences the
effectiveness of management accounting techniques. High-quality information
provides accurate, relevant, and timely insights that are crucial for effective
decision-making. Studies suggest that quality accounting information enhances
managerial decision-making processes, enabling organizations to achieve better
performance outcomes (Goodman, 2023). As organizations navigate complex
markets, the integration of robust management accounting practices with
high-quality data becomes a strategic imperative.
Recognizing this gap, this study aims to examine the
mediating role of accounting information quality in the relationship between
management accounting techniques and decision-making. By addressing this gap,
the research seeks to provide insights that will guide organizations in
leveraging management accounting to achieve superior strategic and operational
outcomes.
1.2 Statement of the Problem
Despite the proven benefits of management accounting
techniques, many organizations struggle to integrate these tools effectively
into their decision-making processes. This gap is not only evident in large
enterprises but is even more pronounced in small and medium-sized enterprises
(SMEs), where financial expertise and resources are often limited (Ismail et
al., 2019). The persistent disconnect between the generation of accounting
information and its practical application in strategic decisions frequently
leads to suboptimal resource allocation, inefficiencies, and missed growth
opportunities. The complexity of certain management accounting methods further
discourages their adoption, particularly in resource-constrained settings,
where managers may lack the expertise to interpret and apply advanced
techniques (Kaplan & Atkinson, 2015).
A significant gap exists between the theoretical advantages
of management accounting practices and their real-world implementation. Many
firms continue to rely on outdated methods, such as traditional cost
accounting, which fail to address the dynamic needs of modern business
environments. This reliance often results in incomplete or inaccurate
decision-making outcomes, as highlighted by Al-Khasawneh et al. (2020). Rapid
changes in the business landscape, including technological advancements and
globalization, underscore the need for a reevaluation of traditional management
accounting frameworks to better support strategic objectives. Furthermore, the
lack of integration between accounting systems and strategic planning processes
creates a siloed approach that undermines the potential of management
accounting to drive growth and innovation (Langfield-Smith, 2008).
This study aims to address these challenges by investigating
how contemporary management accounting techniques, such as activity-based
costing, balanced scorecards, and strategic cost management, can be effectively
integrated into organizational decision-making processes. It seeks to identify
barriers to adoption and provide actionable solutions to enhance the relevance
and utility of management accounting tools in modern business environments.
Management accounting is designed to provide actionable
information to aid organizations in planning and controlling resources.
However, companies lacking sufficient expertise in these techniques may
struggle to make well-informed decisions crucial for long-term survival (Drury,
2018). A recurring issue is the reliance on intuition or generic strategies
without conducting prior analysis using robust management accounting
frameworks.
this study seeks to explore solutions for bridging the gap
between theoretical management accounting techniques and their practical
application. It focuses on the adoption of innovative tools and practices,
along with capacity-building initiatives to equip managers with the necessary
skills and knowledge. By addressing these challenges, organizations, especially
in the manufacturing sector, can enhance their decision-making processes,
achieve resource optimization, and better position themselves in a competitive
market
1.3 Objectives of the Study
The main objective of the study is to examine
the effect of management
accounting techniques in organizational decision-making. The specific objectives are to:
1. examine
the effect of management accounting techniques on decision quality in
listed companies in Nigeria.
2. determine
the effect of management
accounting techniques on resource allocation
efficiency in listed companies in Nigeria
3. examine
the effect of management
accounting techniques on risk management
effectiveness in listed companies in Nigeria
1.4 Research Questions
1.
What is the effect of management accounting techniques on
decision quality in listed companies in Nigeria.?
2. How
will management accounting techniques affect
resource allocation efficiency in listed companies in Nigerian?
3. What
is the effect of management
accounting techniques on risk management
effectiveness in listed companies in Nigeria?
1.5 Research Hypothesis
Ho1: There is no significant effect
of management accounting techniques on
decision quality in listed companies in Nigerian.
Ho2: Management accounting techniques has
no significant effect on resource allocation efficiency in listed companies in
the Nigeria Exchange Limited.
Ho3: Management accounting techniques has
no significant effect on risk management effectiveness in listed companies in
Nigerian.
1.6 Justification of the
Study
This research is justified by the growing complexity of business
environments, where effective decision-making is crucial for survival and
growth. By exploring the role of management accounting techniques, the study
provides insights that can help organizations improve their strategic and
operational decisions. Moreover, understanding the barriers to implementing
these techniques can lead to the development of targeted solutions, enhancing
their practical utility.
1.7 Scope of the Study
The study focused on examining the effect of
management accounting techniques
and Organizational Decision making of listed manufacturing companies in the Nigerian Exchange Limited.
The population for this study was the listed manufacturing companies in
Nigeria. There are 156 manufacturing companies listed on Nigerian Exchange
Limited as at 30th June, 2023.
The study will be limited to five manufacturing companies
in Nigeria. This is due to constraints like degree of precision, cost and time
involve.
1.8 Significance of the Study
The findings of this study are expected to benefit several stakeholders:
• Organizations: Offering practical insights into improving decision-making processes
through management accounting techniques.
• Managers: Equipping them with knowledge on leveraging accounting tools for
strategic decisions.
• Academia: Contributing to the body of knowledge on the intersection of management
accounting and organizational behavior.
• Policy Makers: Providing data to inform policies aimed at enhancing financial literacy
and managerial competency.
1.9 Operationalization of
Variables
Operationalization of variables is the development and application of
science methods to
determine a functional relationship between the dependent and independent
variables.
Y=f(X)
Y = Organizational Decision-Making (ODM)
X = Management Accounting Techniques (MAT)
ODM = f(MAT)
Y = y 1, y 2, y 3, y 4, (dependent variable)
y 1 = Decision Quality (DQ)
y 2
= Resource Allocation Efficiency (RAE)
y 3
= Risk Management Effectiveness (RME)
X = x 1 , x 2 , x 3 , x 4 ,
(independent variables)
Where
x 1 = Budgeting (BUDG)
x 2 = Variance Analysis (VA)
x 3 = Forecasting (FC)
Functional Relationship
Y 1= f (x 1, x 2, x 3, x 4, )
DQ i = f (BUDG , VA, FC ) ………………………………………F1
SA i = f (BUDG , VA, FC) ……………………………………. F2
RAE i = f (BUDG, VA, FC) ……………………………………. F3
ODM = f (BUDG , VA, FC,ABC ) ………………………………………Main model
1.10 Conceptual
Definition of Terms
Management Accounting Techniques: Is the Methods and tools used by management accountants to
assist in planning, controlling, and decision-making within an organization.
These techniques help in analyzing financial and non-financial information to
improve business performance.
Organizational Decision-Making: The process through which organizations identify
problems or opportunities, evaluate options, and select the most appropriate
course of action. It involves both strategic and operational levels of
decision-making.
Budgeting: Can be define as financial planning process where organizations estimate future revenue,
expenses, and resource needs over a specific period. Budgets serve as a roadmap
for financial performance and organizational goals.
Variance Analysis: A technique used to compare actual financial
performance against budgeted or standard performance. It identifies and
explains differences (variances) between planned and actual outcomes to
understand and manage deviations.
Activity-Based Costing (ABC): A costing method that assigns overhead and indirect
costs to products or services based on their consumption of activities. This
technique provides more accurate cost information by focusing on the
relationship between costs, activities, and products.
Decision Quality: Refers to the
effectiveness of a decision in achieving desired outcomes. High-quality
decisions are well-informed, timely, and aligned with organizational goals.
Strategic Alignment: The process of ensuring that an organization's
goals, resources, and actions are consistent with its strategic objectives. It
ensures that all efforts contribute to the overarching mission and vision.
Resource Allocation Efficiency: The optimal distribution of resources (time, money,
people, etc.) to maximize organizational performance and achieve set objectives
while minimizing waste.
Risk Management Effectiveness: The ability of an organization to identify, assess,
and mitigate risks that could adversely affect its operations or objectives.
Effective risk management helps protect assets and ensure business continuity.
Forecasting: The process of predicting future financial or
operational outcomes based on historical data, trends, and other relevant
information. It helps organizations anticipate challenges and opportunities to
plan accordingly.
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