The impact of contextual factors on the adoption of management accounting practices: A study based on manufacturing firms listed in Colombo Stock Exchange

Abstract

Globally there is a growing interest among scholars on the impact of contextual factors in adoption of Management Accounting Practices (MAP) in organizations. In order to be competitive and effective in market, the management of a firm needs to use MAP objectively (Affes and Ayadi, 2014). There is no single MAP that can be applied effectively to all conditions or organizations (Otley, 1980), and several MAP are only effective for certain situations or organizations. According to prior literature (Gul and Chia, 1994; Moores and Chenhall, 1991) major part of management accounting research has been carried out by applying the contingency theory. The notion of contingency theory related to management accounting is based on the premise that there is no universally applicable MAP. The suitability of a particular MAP is argued to be contingent upon the environment, technology, size, structure, strategy and national culture of a particular organization (Chenhall, 2003).

Previous studies have also identified that lack of adoption of MAP is associated with high implementation cost and invalid nature of the assumptions underlying competitive markets (Scapens, 1993). Further, Fonseka, Senarathna and Manawaduge (2005) found that lack of human resources, lack of knowledge and skill in respective MAP, resistance to change over from the present system and perception of business community regarding use of MAP are also contributing for the lack of adoption of MAP in Sri Lankan context. Though scholars have identified the association between contingency factors and the adoption MAP (Al-Omiri and Drury, 2007; Abdel-Kader and Luther, 2008), scant attention has been paid to assess the influence in the Sri Lankan context. Therefore, an attempt is made to fill the identified gap by this study.