The Impact of Contextual Factors on the Adoption of ManagementAccounting Practices: A Study Based on Manufacturing Firms Listed in the Colombo Stock Exchange

The purpose of this study is to examine the impact of contextual factors on the adoption of Management Accounting Practices (MAPs) in the listedmanufacturing companies in Sri Lanka using contingency theory perspectives.

 

The study adopted quantitative research and employed a cross-sectional research design. A questionnaire was administered personally to one member of the senior level management of each listed manufacturing firm in Colombo Stock Exchange (CSE). A seven-point Likert scale was used in designing the questionnaire, where respondents were asked to rate their opinions. The study examined the impact of a range of potential contingent variables on a broad set of MAPs. The variables relate to external characteristics, organizational characteristics, and manufacturing or processing characteristics.

 

The findings indicate that there is a positive significant relationship between adoption of MAPs and contextual factors such as, Perceived Environmental Uncertainty (PEU), organisation structure and firm size and adoption of MAPs. In other words, when PEU move from highly predictable to highly unpredictable, the adoption of selected MAPs increase by 44.1 percent.Similarly, when organisation structure moves from decentralized to centralized structure, the adoption of selected MAPs increase by 30.9percent. Moreover, when firm size is large, the adoption of MAPs increases by 25.1 percent. However, contrary to our original expectation, both organisation strategy, and processing system do not have significant relationship between the adoption of MAPs. This indicates that firms adopt MAPs regardless of the strategy that they follow. Further, it shows that the complexity of processing systems does not affect the adoption of MAPs. This study extends the knowledge on the impact of contextual factors on the adoption of MAPs in the context of manufacturing firms in Sri Lanka.