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Theoretical Framework

Study in management accounting has a long tradition with a diversity of theories being

employed (Scapens & Bromwich, 2010). This study is anchored in the framework of contingency

theory and anchor-network theory.

Contingency Theory

As stated in Drury (2008), contingency theory proposed that to design effective

management accounting control systems, it is necessary to consider the circumstances and its

applicability in which they will be used. Since various companies operate in different industries,

the application of some management accounting practices may not be applicable to others. The

company may effectively implement the management accounting practices through identifying the

company’s structure since there is no single general standard management accounting practice can

be applied. Moreover, the company’s objectives are achieved through further development and

proper application of management accounting tools.

Actor Network Theory

Actor Network Theory can be defined as a research method with a focus on the connections

between both human and non-human entities. It describes how these connections lead to the

creation of new entities that do not necessarily practice the sum of characteristics of constituent

entities (Dankert, 2011). It suggest that the resulting impact between management accounting

practices and the overall financial performance of the company are because actions affecting these

changes are brought about by the equal interaction of both human and non- human actants, for

example such combination of management accountants and the advancement of technology will
lead to the creation of a network which can be a factor in assessing the impact of management

accounting practices to the financial performances of the company. However, this does not imply

that it is limited solely on human and non- human actants in assessing the possible correlation of

management accounting practices and financial performance. In the absence of different types of

systems present today including the management accounting system, accountants cannot and will

not be able to produce accounting as a service.

Conceptual Framework

Management Accounting Financial Performance


Practices (MAPs)
 Profitability Ratio
 Costing Method o Return on Assets
 Budgeting o Return on Equity
o Gross Profit Ratio
 Performance Evaluation
o Net Profit Ratio
 Information for Decision
o Operating Profit
Making Margin
 Strategic Analysis  Liquidity Ratios
o Current Ratio
o Cash Ratio
o Quick Asset Ratio
 Solvency Ratios
o Debt to Equity
o Debt to Asset
 Activity Ratios
o Asset Turnover
o Inventory Turnover
The effectiveness of management accounting practices in assisting firms achieving their

goal has become important research topic. As management accounting practices are presumed to

provide relevant information for today’s organization, the investigation of the empirical evidences

on management accounting practices’ effectiveness in enhancing business performance should be

carried out (Ahmad, 2017).

Undertaking the analysis of firm's financial performance determinants is crucial for the

stakeholders, particularly the investors'. The goal of any company is to ensure that at all times can

maximize the shareholder's value. However, the shareholder's value is determined by some factors:

company's operational risks, projected future earnings and prevailing profitability of a firm (Drury

2013). According to Alumno, Caoile, Cruz and Landayan (2018), financial performance is one of

the most widely used methods in measuring the value of the company. However, it is not enough

to cover the informational needs of the company. Furthermore, non-financial information acquired

through management accounting such as those relating to the company’s efficiency, productivity,

and other financial performance measures are also relevant to the improvement of the company’s

financial performance as well as to the achievement of the overall organizational goals.

According to Madhuka and Bandara (2016), management accounting measures analyzes

and reports financial and nonfinancial information that helps managers to make decisions,

implement strategy to achieve the goals of an organization. Companies use management

accounting techniques to assess their operations. These include budgeting, variance analysis and

breakeven analysis. These methods help organizations to plan, direct and control operating costs

and to achieve profitability. (Horngren, et al., 2009).

Research Design
The methods used to gather, analyze and present the effects of management accounting

practices in the financial performance of the manufacturing companies are descriptive survey

research design and correlational research method.

Descriptive research design is used in collecting the data from the respondents. This

research method, also known as statistical research, describes data and characteristics about the

population or particular phenomenon being studied. This design is concerned with answering

questions as who, what, where, when and how. However by nature, descriptive studies do not and

cannot be used to explain causation (Mcnabb 2014). The researcher used this method by giving

survey questionnaires to the proper respondents in gathering information about their extent of

adaption of the different management accounting tools.

On the other hand, correlational method is a research method in which researchers measure

two variables and assess the statistical relationship between them with no effort to control the

variables. This method is also used to determine the extent to which two variables are related rather

than the extent to which one variable cause changes to another variable. (source)

The researchers view both methods as deemed appropriate to use and the most suitable

method in determining the significant relationship of management accounting practices and

financial performance.