«Thu Thi Nguyen*, Lokman Mia, Allen Huang Department of Accounting, Finance and Economics, Griffith Business School Griffith University, Australia ...»
13 Insert Figure 5 here The results run contrary to our expectations for SOEs with regard to the relationship between the use of MAS information and managerial performance (β2). It was stronger than that in POEs and FOEs. According to Hartmann and Moers (1999), testing the differences in ‘strength’ of the relationships between variables is based on the ‘clouds’ of observations (scatter diagrams). The use of MAS information and managerial performance in SOEs had a higher correlation than in POEs and FOEs since the cloud of observations in SOEs was narrower (data are not presented in this paper, but are available from the authors). However, the differences among three groups were not significant (zobs 1.24, one-tailed; see Table 7 and Figure 4).
5. DISCUSSIONS AND CONCLUSIONThis study examined the effects of reward systems on the use of MAS information and managerial performance. It also studied the mediating role of the use of MAS information in the relationship between reward systems and managerial performance. In addition, the impact of ownership type on the relationships was analysed.
To our knowledge, it is the first study that evaluates the relationships between reward systems, the use of MAS information and managerial performance under the influence of ownership type.
5.1 Summary of findings The results can be summarised as follows.
Our findings show a positive relationship between reward systems and the use of MAS information in Vietnamese enterprises. This is in line with previous arguments that a strong link between rewards and performance targets might encourage managers to use more broad scope MAS information in making decisions to fulfill these targets (Sprinkle, 2003, van Veen-Dirks, 2010, Fullerton and McWatters, 2002). Regarding the relationship between the use of MAS information and managerial performance, the results show the more that managers used broad scope MAS information the higher the performance they achieved (Mia and Clarke, 1999, Chong and Eggleton, 2003, Chong, 2004, Mia, 1993). We also found a positive relationship between reward systems and managerial performance, and a positive mediating role of the use of MAS information on this relationship. The findings improve the understanding of positive direct effects of reward systems and the use of MAS information on managerial performance in Sprinkle (2000). In addition, the evidence for positive indirect effects of reward systems on managerial performance via the use of MAS information was also provided.
The findings of this study provide the first evidence for the impact of ownership type on the use of MAS information and the link between rewards and performance, as well as on their effect on managerial performance in Vietnamese enterprises. In particular, managers in SOEs assessed the link between rewards and performance targets in their companies, their use of MAS information and performance as being less significant than that of their counterparts in POEs and FOEs. However, the correlation between the use of MAS information and managerial performance in SOEs was higher than that in POEs and FOEs. This unexpected result might be attributed to the high level of instability in SOEs’ business environment in the 2000s and 2010s. The process of conversion of state-owned enterprises into corporations (equitisation) occurred rapidly at this time due to pressure from international donors, such as the World Bank and the IMF (World Bank, 2001). All state enterprises had to be transformed into one-member limited companies or corporations by July 2010 and had to operate under the same law, Enterprise Law, as other organisations, instead of under the Law on State Enterprise 14 prior to July 2010 (Pham, 2010, Sjöholm, 2006, Vietnamese Government, 2006). Since then, the state companies with poor performance have been privatised.
In this equitisation process, the state sector made efforts to improve organisational efficiency and effectiveness (Le and Truong, 2005). In such an uncertain and competitive business environment, the relationships between reward systems, the use of MAS information and managerial performance, might be more meaningful. This is because firms often increase the use of performance-based rewards in response to environmental uncertainty (Schulz et al., 2010), which may affect manager’s efforts in performing their functions, as well as the motivation of managers in seeking information that can help them approach performance targets (Fullerton and McWatters, 2002, van Veen-Dirks, 2010, Zhu et al., 2007).
The sampling data indicate that, although the use of MAS information and managerial performance in FOEs was higher than in SOEs, the relationship between these two variables in SOEs was significantly stronger. This finding could also be attributed to the higher level of uncertainty in SOEs’ business environment compared to that in FOEs in the 2000s (as discussed above). In this context, the business environment in SOEs might be more competitive and less stable, which led to the effect of the use of MAS information on managerial performance being more positive (Patiar and Mia, 2008, Agbejule, 2005).
5.2 Managerial implications Today, the important role of reward systems in motivating managers’ behaviour, such as their use of MAS information in making decisions and their efforts in performing managerial functions, has been recognised (Fullerton and McWatters, 2002, van Veen-Dirks, 2010, Zhu et al., 2007, Sprinkle, 2000). Our study indicates that, in transitional economies, enterprises with a strong link between rewards and performance targets may encourage followers to make an effort to achieve higher performance. This is especially the case for SOEs in the equitisation process to assist them in making changes and in improving managerial performance. Thus, performance-based rewards may be important in Vietnamese SOEs currently.
The old reward system, which was egalitarian and less based on individual efforts and organisational efficiency (Zhu et al., 2008), has had an influence on most equitised SOEs, since the state is often the majority shareholder in these companies, even in those with less than 20% state capital investment. The other stakeholders, such as customers, employees, and outside investors, are only minority shareholders. The old reward system in these companies needs time and positive factors to change (Zhu et al., 2007). Consequently, this study suggests that the link between rewards and performance should be strengthened in equitised SOEs to encourage managers to use MAS information in making decisions to achieve performance targets, which in turn improves managerial performance.
5.3 Limitations and directions for future research Several limitations should be considered in generalising the results of this study. First, the measurements of all variables of the study were based on one single questionnaire; therefore, the strength of the associations between these variables may be somewhat overestimated.
Second, the use of convenience sampling to collect data is prone to sampling bias in terms of under or over representing subgroups of enterprises (Kumar, 2006). Although necessary steps (e.g., careful review of previous study, in-depth interviews with managers) to reduce sampling bias were conducted, the findings of the study should be treated as suggestions. A future study should collect longitudinal data to examine the causal relationships among variables of the study, especially through the equitisation process of SOEs. Moreover, a probability sampling approach may improve our understanding of how reward systems and the use of MAS information impact on managerial performance. The third limitation of the study is the 15 measurement of managerial performance, which was only based on self-rating scales (subjectivity). This measurement is a threat to the validity of the results and likely to have higher mean values (Thornton, 1968). Future research may improve the validity of the construct by using 360o feedback (from the superior, self, co-workers, subordinates, and customers) to assess managerial performance (Fletcher and Baldry, 2000). Finally, a large number of factors may affect the relationships examined in this study; therefore, future studies should consider more factors, such as leadership style, culture, and firm size in the research model to enrich the literature regarding the use of MAS information and managerial performance.
References Abernethy, MA & Bouwens, J 2005, Determinants of accounting innovation implementation, Abacus, Vol. 41 No. 3, pp. 217-240.
Abernethy, MA & Guthrie, CH 1994, An empirical assessment of the "fit" between strategy and management information system design, Accounting & Finance, Vol. 34 No. 2, pp. 49-66.
Agbejule, A 2005, The relationship beteween management accounting systems and perceived environmental uncertainty on managerial performance: a reserach note, Accounting and Business Research, Vol. 35 No. 4, pp. 295-305.
Alam, B & Mia, L 2006, Need for achievement, style of budgeting and managerial performance in a non government organization (NGO): Evidence from an oriental culture, International Journal of Business Research, Vol. 6 No. 3, pp. 35-42.
Bangchokdee, S 2008, Linking competitive strategy, product life cycle, the use of broad scope MAS information, and organisational performance: a comparative study of food-processing and electronics industries in Thailand Dissertation, Griffith University.
Batjargal, E 2010, The role of ownership structure on the linkage of senior managers’ compensation to firm performance in China’s listed firms, Master's Thesis.
Bromwich, M 1990, The case for strategic management accounting: The role of accounting information for strategy in competitive markets, Accounting, Organizations and Society, Vol. 15 No. 1-2, pp.
Burkert, M, Fischer, FM & Schäffer, U 2011, Application of the controllability principle and managerial performance: The role of role perceptions, Management Accounting Research, Vol. 22 No. 3, pp. 143-159.
Byun, DH, Kim, J & Shin, JY 2009, The effects of deferred compensation and performance-based compensation on firm value, Asia-Pacific Journal of Accounting & Economics, Vol. 16 No. 1, pp. 49-68.
Chenhall, RH 2003, Management control systems design within its organizational context: findings from contingency-based research and directions for the future, Accounting, Organizations and Society, Vol. 28 No. 2-3, pp. 127-168.
Chenhall, RH 2006, Theorizing Contingencies in Management Control Systems Research, in Christopher S. Chapman, A. G. H. & Michael, D. S. (eds.) Handbooks of Management Accounting Research. Elsevier.
Chenhall, RH & Langfield-Smith, K 2003, Performance measurement and reward systems, trust, and strategic change, Journal of Management Accounting Research, Vol. 15 No., pp. 117.
Chenhall, RH & Langfield-Smith, K 2007, Multiple Perspectives of Performance Measures, European Management Journal, Vol. 25 No. 4, pp. 266-282.
Chenhall, RH & Morris, D 1986, The impact of structure, environment, and interdependence on the perceived usefulness of management accounting systems, Accounting Review, Vol. 61 No. 1, pp.
16 Chia, YM 1995, Decentralization, management accounting system (MAS) information characteristics and their interaction effects on managerial performance: A Singapore study, Journal of Business Finance & Accounting, Vol. 22 No. 6, pp. 811-830.
Chin, WW 2010, How to Write Up and Report PLS Analyses, in Esposito Vinzi, V., Chin, W. W., Henseler, J. & Wang, H. (eds.) Handbook of Partial Least Squares. Springer Berlin Heidelberg.
Chong, VK 1996, Management accounting systems, task uncertainty and managerial performance: A research note, Accounting, Organizations and Society, Vol. 21 No. 5, pp. 415-421.
Chong, VK 2004, Job-relevant information and its role with task uncertainty and management accounting systems on managerial performance, Pacific Accounting Review, Vol. 16 No. 2, pp.
Chong, VK & Chong, KM 1997, Strategic choices, environmental uncertainty and SBU performance: A note on the intervening role of management accounting systems, Accounting & Business Research, Vol. 27 No. 4, pp. 268-276.
Chong, VK & Eggleton, IRC 2003, The decision-facilitating role of management accounting systems on managerial performance: The influence of locus of control and task uncertainty, Advances in Accounting, Vol. 20 No., pp. 165-197.
Chow, CW, Deng, FJ & Yuen, S 2006, The adequacy of information for managerial decision-making in China’s business enterprises: an exploratory study, Int. J. Accounting, Auditing and Performance Evaluation, Vol. 3 No. 2, pp. 287-303.
Chow, CW, Shields, MD & Wu, A 1999, The importance of national culture in the design of and preference for management controls for multi-national operations, Accounting, Organizations and Society, Vol. 24 No. 5-6, pp. 441-461.
Cohen, J 1988. Statistical Power Analysis for the Behavioral Sciences, Lawrence Erlbaum Associates, Hillsdale, NJ.
Cohen, J & Cohen, P 1983. Applied Multiple Regression/Correlation Analysis for the Behavioral Sciences, Lawrence Erlbaum Associates, Mahwah, NJ.
Davila, A 2008, Performance measurement and management control Systems: Current research and ideas going forward, in Epstein, M. (ed.) Studies in Managerial and Financial Accounting.
Emerald Group Publishing Limited.
Demski, JS 2008. Managerial uses of accounting information, Springer Science Business Media, LLC, Gainesville, Florida.
Ding, S, Jia, C, Li, Y & Wu, Z 2011, Reactivity and Passivity After Enforcement Actions: Better Late Than Never Journal of Business Ethics, Vol. Springer No.
Dunk, AS 2003, Moderated regression, constructs and measurement in management accounting: a reflection, Accounting, Organizations and Society, Vol. 28 No. 7-8, pp. 793-802.
Elbashir, MZ, Collier, PA & Sutton, SG 2011, The Role of Organizational Absorptive Capacity in Strategic Use of Business Intelligence to Support Integrated Management Control Systems, The Accounting Review, Vol. 86 No. 1, pp. 155-184.
Eldenburg, LG & Krishnan, R 2008, The influence of ownership on accounting information expenditures, Contemporary Accounting Research/Recherche Comptable Contemporaine, Vol.
25 No. 3, pp. 739-772.
Epstein, MJ 2008, Aligning, measuring, and rewarding performance in complex organizations, in
Epstein, M. J. & Manzoni, J.-F. (eds.) Performance measurement and management control:
measuring and rewarding performance. Emerald Group Publishing Ld.