Determinants of management accounting practices of firms listed on the Nairobi securities exchange

Abstract

The application of management accounting in less developed countries remains unsatisfactory and studies on this area are rare in the literature. They note that the reason could be due to the relatively under-developed status of economic and business administration in less developed countries. Studies in other countries have shown that despite the developments in management accounting theory, the practice has not changed as companies still prefer the use of traditional management accounting tools. The objective of this study was to investigate the determinants of management accounting practices of listed firms in Kenya This study adopted a cross-sectional survey design. The population of this study was all the 56 companies listed on the Nairobi Securities Exchange. Primary data was collected in this study by way of questionnaire. The questionnaires were then mailed to heads of finance departments. Data was analysed using descriptive analysis and regression analysis. The results were presented in tables. The study found that the most adopted management accounting practices were the use of information for decision making, costing systems, performance evaluation, strategic analysis and finally budgeting. The regression results showed that size of the firm, the decision usefulness of cost information, and the business culture all positively and significantly influenced management accounting practices in firms at 5% level of confidence. The study concludes that all the practices that includes the use of information for decision for decision making, use of costing systems, use of performance v evaluation, use of strategic analysis and budgeting were all important practices in the firms. This study recommends the creation and enhancement of awareness among firms of the importance of cost information as this is a major factor that influences the adoption of management accounting practice in any firm. The culture of the business unit should also be looked into as it also affects the adoption of the management accounting practices. Culture that include willingness to experiment, being result oriented, action oriented or having a high expectation for performance increases the possibility of adoption of the management accounting practices.