Impact of Management Accounting Practice on Financial Performance: Evidence from Listed Manufacturing Companies in Bangladesh

Abstract

Purposes: There have been recent calls for additional research in order to enhance the understanding of the need for a multiple-perspective approach for studying Management Accounting Practice (MAP) and potential contingency factors that explain the adoption of MAP. The motivation for this research stems from a lack of knowledge about the current use of MAP, particularly in developing countries. Therefore, this research aims to investigate the adoption of MAP and their correlations with external factors that impact organizational performance, particularly financial performance, in Bangladesh, a developing country. This research explores the uptake of a broad range of MAP in manufacturing companies in Bangladesh, determines factors that affect the extent of use of MAP, and lastly examines the relationship between the use of MAP and the financial performance of the manufacturing industry. Methodology and Data: The study employed a quantitative research method, utilizing a sample size of 78 and collecting data via a structured questionnaire. This study applied a multivariate regression analysis, a structural equation model, and a mediation analysis to measure the impact. Findings: The results show that the majority of respondents have identified the five management accounting areas, such as costing, budgeting, performance evaluation, information for decision-making, and strategic management accounting. The use of the costing system, budgeting system, and performance evaluation system is significantly higher than for the decision support system and strategic management accounting, which indicates that the uptake of traditional MAP is greater than for sophisticated MAP. The results show that traditional management accounting practice are popular in Bangladesh, whereas contemporary management accounting practice are less common. The findings also appear to confirm recent studies in other countries about the popularity of traditional practice over the much-acclaimed advanced ones. The costing method has a significant and positive impact on financial performance. The costing system employs a vi positive relationship to clarify financial performance. An empirical study suggests that using budgeting methods improves financial performance. Both variables have a statistically significant positive association. Efficient decision-making positively influences performance evaluation. Research has shown that improvements in effective decision-making lead to a rise in financial performance. An effective decision-making process helps optimize a company's financial performance. Strategic analysis's coefficient value provides a positive explanation for financial performance. An incremental enhancement of the application of strategic analysis within a company has yielded a corresponding improvement in the financial performance of the industrial sectors in Bangladesh. Regarding contingent factors, increase in organizational size results in a slight increase in the use of MAP. An increase in ownership practice results in a significant and positive improvement in MAP utilization. Further, the study found that four out of five contingent factors size of the company, age of the company, participation of the owner or manager in the development of MAP in the company, and use of information technology have a positive relationship with the use of certain MAP, while qualified accounting personnel have a negative coefficient. Finally, the mediation effect is significant, making it acceptable. The coefficient of MAP measures the direct influence of the independent variable without the involvement of a mediator variable. Research Implications and Contribution: The findings contribute to both academic understanding and practical insights by elucidating the nuanced interplay between Management Accounting Practice and corporate outcomes within the context of the Bangladeshi manufacturing sector. The study offers valuable guidance for industry practitioners, policymakers, and regulatory bodies, facilitating informed decision-making and strategic resource allocation aimed at enhancing organizational performance and fostering sustainable growth in the manufacturing industry.