Investigating the Empirical Effect of ABC Stages on the Performance of Companies

Document Type : Research Paper

Authors

1 Department of Accounting, University of Cheng Du, China

2 Department of Accounting, Shiraz University, Shiraz, Iran

3 Department of Management and Accounting, University Malaya, Malaysia

Abstract

The major aim of this study is to extend Zhang and Isa’s (2011) study by investigating the moderating effect of the stages of ABC application on the firms’ performance. This study selects 106 Chinese manufacturing companies and employs multiple regression technique and structural equation modelling. It examines whether successful application of the ABC directly affects the firm’s performance, and tests whether the stages of ABC application could produce a moderating effect on the firms’ performance. Results indicate that successful application of ABC, significantly affects achievement of the costs and quality, while sales volume is only marginally affected by ABC application, and there is an insignificant relationship between ABC application and achievement of the targets pertaining to productivity, services, and profits. Moreover, this study reports that stages of ABC application would improve the strength of the relationship between ABC application success and firms’ performance. The findings emphasize the importance of cost, quality, and stages of ABC implementation issues for management, especially for the intention of the performance evaluation.

Keywords

Main Subjects

References

 Al-Hroot, Y. A. K., Diab Massadeh, A. A., & Lotfi Amireh, M. S. (2015). The effect of activity-based costing on companies financial performance: A Study among Jordanian industrial shareholding companies. European Journal of Business and Management, 7(35), 146-153.
 
Anderson, S. W., & Lanen, W. N. (1999). Economic transition, strategy and the evolution of management accounting practices: The case of India. Accounting, Organizations and Society, 24(5-6), 379-412.
 
Anderson, S. W., & Young, S. M. (1999). The impact of contextual and process factors on the evaluation of activity-based costing systems. Accounting, Organizations and Society,24(7), 525-559.
Banker, R. D., Bardhan, I. R., & Chen, T. -Y. (2008). The role of manufacturing practices in mediating the impact of activity-based costing on plant performance. Accounting, Organizations and Society, 33(1), 1-19.
 
Bjørnenak, T. (1997). Diffusion and accounting: The case of ABC in Norway”. Management Accounting Research, 8(1), 3-17.
 
Brewer, P. C. (1998). National culture and activity-based costing system: A note. Management Accounting Research, 9, 241-260.
 
Browne, M. W., & Cudeck, R. (1993). Alternative ways of assessing model fit. In K. A. Bollen & J. S. Long (Eds.), Testing structural equation models (136-162). Newbury Park, CA: Sage.
 
Byrne, S., Stower, E., & Torry, P. (2009). Activity based costing implementation success in Australia. Journal of Applied Management Accounting Research, 7(1), 37-51.
 
Cagwin, D., & Bouwman, M. J. (2002). The association between activity-based costing and improvement in financial performance. Management Accounting Research, 13, 1-39.
 
Carolfi, I. A. (1996). ABM Can improve quality and control costs. Cost and Management, (5), 12-16.
 
Cavana, R. Y., Delahaye, B. L., & Sekran, U. (2001). Applied business research: Qualitative and quantitative methods. Australia : John Wiley & Sons Ltd.
 
Chenhall, R. H. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Accounting, Organizations and Society, 28, 127-168.
 
Cooper, R. (1987). The Two Stage Procedure in Cost Accounting, Part One". Journal of Cost Management, 1(2), 43-51.
 
Cooper, R., & Kaplan, R. S. (1998). Profit priorities from activity–based costing, and measuring the cost of resource capacity. In R. S. Kaplan & R. Cooper (Eds.), Cost and effect: Using integrated cost system to drive profitability and performance (111-136). Boston: Harvard Business School Press.
 
Cooper, R. B., & Zmud, R. W. (1990). Information technology implementation research: A technological diffusion approach. Management Science, 36, 123-139.
 
Donaldson, L. (1987). Strategy and structural adjustment to regain fit and performance: In defence of contingency theory. Journal of Management Studies, 24(1), 1-24.
 
Donaldson, L. (2001). The contingency theory of organizations. Thousand Oaks, CA: Sage Company.
 
Foster, G., & Swenson, D. w. (1997).  measuring the success of Activity-based Cost Management and Its Determinants.  Journal of Management Accounting Research, 9, 109-141.
 
Gosselin, M.(1997). The effect of strategy and organizational structure on the adoption and implementation of activity-based costing. Accounting, Organizations and Society, 22, 105-122.
 
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (2006). multivariate data analysis (6th ed.).NJ: Prentice Hall.
 
Hamilton, R. T., & Shergill, G. S. (1992). The relationship between strategy-structure fit and financial performance in New Zealand: Evidence of generality and validity with enhances controls. Journal of Management Studies, 29, 95-113.
 
Hofstede, G. (1983). The cultural relativity of organizational practices and theories. Journal of International Business Studies, 14, 75-89.
 
Isa, C. R. (2004). The effect of change in market competition and change in AMT adoption on changes in management accounting and control system (Doctoral dissertation). University Putra, Malaysia.
 
Ittner, C. D., Lanen, W. N., & Larcker, D. F. (2002). The association between activity-based costing and manufacturing performance. Journal of Accounting Research, 40(3), 711-726.
 
Jafarnejad, A., Mehregan ,M. R., Namazi, M., .& Abtahi, S. M. (2016). A mathematical programming model of activity-based costing in order to improve profitability and optimal production orders. International Journal of Applied Engineering Research, 11(6), 4100-4108.
 
Kaplan, R. S., & Anderson, S. R. (2004). Time-driven Activity-based Costing. Harvard Business Review, 82(11), 131-138
 
Kaplan, R. S., & Anderson, S. R. (2007). Time-Driven activity-based costing: A simpler and more powerful path to higher profits. Massachusetts: Harvard Business School Press.
 
Kayali, N., Yearly, A. N., Sahin, D., & Dogan, S. (2014). The effect of ABC systems on the performance of sales representatives: A field study in a Turkish firm. International Journal of Research in Social Sciences, 4(5), 119-128.
 
 
Kennedy, T., & Affleck-Graves, J. (2001). The impact of activity-based costing techniques on firm performance. Journal of Management Accounting Research, 13, 19-45.
 
Khalid, A. (2005). Activity-based costing in Saudi Arabia's largest 100 firms in 2003. Journal of American Academy of Business, Cambridge, 6(2), 285-292.
 
Krumwiede, K. R. (1998). The implementation stages of activity-based costing and the impact of contextual and organizational factors. Journal of Management Accounting Research, 10, 239-277.
 
Krumwiede, K. R., & Roth, H. P. (1997). Implementing information technology innovations: the activity-based costing example. SAM Advanced Management Journal, 62, 4-13.
 
Maccallum, R. C., Browne, M. W., & Sugawara, H. M. (1996). Power analysis and determination of sample size for covariance structure modelling. Psychological Methods, 1, 130-149.
 
Maiga, A. S., & Jacobs, F. A. (2007). Budget participation's influence on budget slack: The role of fairness perceptions, trust and goal commitment. Journal of Applied Management Accounting Research, 5(1), 39-58.
 
McGowan, A. S. (1998). Perceived benefits of ABCM implementation. Accounting Horizons, 12(1), 31-50.
Mia, L., & Clarke, B. ( 1999). Market competition, management accounting systems and business unit performance. Management Accounting Research, 10(2), 137-158.
 
 
Namazi, M. (2009). Performance-focused ABC: A third generation of activity-based costing system. Cost Management, 23(5), 34-46.
 
Namazi, M. (2016a). Time-Driven activity based costing: Theory, applications and limitations. Iranian Journal of Management Studies, 9(3), 457-482.
 
Namazi, M. (2016b). Emergence of the time-driven activity-based costing. International Review of Management and Business Research, 5(3),1008-1020.
 
Namazi, M., & Namazi, N. R. (2016). Conceptual analysis of moderator and mediator variables in business research. Procedia Economics and Finance, 36, 540-554.
 
Peter, J. P. (1979). Reliability: A review of psychometric basics and recent marketing practices. Journal of Marketing Research, 16, 6-17.
 
Pokorna. J. (2016). Impact of activity-based costing on financial performance in the Czech
Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64(2), 643-652.
 
Sajid, A., Alaa, M., Malo-Alain, A. M., & Imdadul Haque, M. (2015). Impact of activity-based costing on firm’s performance in  Saudi Arabia. The Science International (Lahore), 27(1), 597-606.
 
Shields. M. (1995). An empirical analysis of firms' implementation experiences with activity-based costing. Management Accounting Research, 7, 148-166.
 
Soheilirad, S., & Sofian, S. (2016). A proposed model of the mediating effect of strategic management accounting on the relationship between perceived environmental uncertainty and firm performance. International Journal of Research – Granthaalayah,  4( 1) , 231-239.
 
Steiger, J. H. (1990). Structural model evaluation and modification. Multivariate Behavioral Research. 23, 173-180.
 
Swenson, D. (1995). The benefits of activity-based cost management to the manufacturing industry. Journal of Management Accounting Research, 7, 167-180.
 
Williams, J. J., & Seaman, A. E. (2001). Predicting change in management accounting systems: National culture and industry effects. Accounting, Organizations and Society, 26, 443-460.
 
Williams, J. J., & Seaman, A. E. (2002). Management accounting systems change and departmental performance: The Influence of managerial information and task uncertainty. Management Accounting Research, 13, 419-45.
 
Yanren, X., Wenbin, S., & Thomas, W. L. (2008). Activity-Based costing popularity in China.  Cost Management, 22, 40-48.
 
Zaman, M. (2009). The Impact of activity based costing on firm performance: The Australian experience. International Review of Business Research Papers, 5, 200-208.
 
Zhang, Y. F., & Isa, C. (2010). The behavioral and organizational factors’ effect on ABC Success in China. African Journal of Business and Management, 4(11), 2302-2308.
 
Zhang, Y. F., & Isa, C. (2011). The effect of activity-based costing on firms’ performance, a study among Chinese manufacturing firms. Australian Journal of Basic Applied Science, 9, 227-237.
 
Zhang, Y. F., Hoque, Z., & Isa, C. (2015). The effect of organizational culture and structure on the success of activity-based costing implementation. Advances in Management Accounting，25，229-257.
 
Interdisciplinary Journal of Management Studies (Formerly known as Iranian Journal of Management Studies)
Volume 10, Issue 1
March 2017
Pages 175-205

Files

Share

How to cite

Statistics