Improving the Managerial Performance in the Context of Financial Autonomy: An empirical investigation in public education sector45286

Improving the Managerial Performance in the Context of Financial Autonomy: An empirical investigation in public education sector Pham Quang Huy 1* , Vu Kien Phuc 2 1 University of Econ

Improving the Managerial Performance in the

Context of Financial Autonomy: An empirical

investigation in public education sector

Pham Quang Huy (1)(*) , Vu Kien Phuc (2)

1 University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam

2 Vinh Long College of Economics and Finance, Vinh Long, Vietnam

*Correspondence: pquanghuy@ueh.edu.vn

Abstract: With the purpose to contribute to a greater awareness of Managerial Performance (MP) in

public education sector (PES), we hypothesize that the way in which the MP in PES are being affected

by its determinants, identify the relationships between the parameters affecting MP and to analyze multiple interactions between them through construction of structural equation model (SEM) based

on a sample of 412 accountants working in PES in Vinh Long province The results indicate that the

MP in PES depends significantly on Effective Management Accountant (EMA), Strategic Leadership (SL), Management stakeholder (MS) and is controlled by Financial Autonomy (FA) These findings also provide important implications, both for practice and for policymaker

Keywords: managerial performance; financial autonomy; management accountant; public education

sector

1 Introduction

Managerial Performance (MP) was acknowledged as one of the most outstanding keys which was claimed to be improved all the time as it is an indicator of the accomplishment of managers to identify target (Zenita et al 2015) There is a growing large body of literature which has addressed the type of subject on variegated aspects Previous studies has indicated the impact of cost management knowledge on the relationship between budgetary participation, and MP (Agbejule & Saarikoski 2006), the understanding

of responses of individual managers to the application of the controllability principle, and especially the potential negative effect of non-application on MP (Burkert et al 2011), core competencies were more critical for top managers and less important for middle managers and line managers in determining MP (Bucur 2013)

Besides, MP was still influenced by the behavior of the individuals related to budgeting preparation and self-efficacy in strategic management accounting information use (Zenita et al 2015) In exploration the determinants of MP, Rodan (2010) concludes that innovativeness plays a key role in linking network structure and network content to performance in these five theoretical causal motors namely autonomy, competition, information brokering, opportunity recognition, and innovativeness

Surprisingly, there has been lack of research conducted on MP in public sector, especially in PES although education plays a basic role in future of nations (Jalaliyoon & Taherdoost 2012) and public schools have long been acknowledged as important sectors for the economic stability and global employment In addition, with the aim at ameliorating the effectiveness and efficiency of schooling, enhanced autonomy for school sites was supposed motility for school improvement The perspectives of enhanced school autonomy, assessment and accountability inaugurate in the 1990s, have created a new method to school governance (van Amelsvoort & Scheerens 1997)

Therefore, educational research has become increasingly aware of measures of school governance, especially in the context of school autonomy Nevertheless, much of the recent literature still keeps on exploring on institutional structures (Overman et al 2014) or human resources autonomy (i.e Bach 2014) Numerous studies have focused on FA in the contexts of western countries (Verhoest et al 2010), while the practices of FA in organizations from developing regions have dealt with the limitation of the number of studies

In response to the requirement for more research investigation on the MP of PES, this study intends to present a better understanding on the determinants of MP in the context of FA Our contributions lie in construction of SEM based on a sample of 412 accountants working in PES in Vinh Long province Besides, through empirical testing results, the determinants, which were proved to have significant impact on MP, also made

a remarkable contribution to the practitioners and policymakers as reference basis Therefore, in this study, we attempt to bridge these above mentioned gaps through addressing following formulated research questions:

RQ1 What factors will significantly impact to MP of Vinh Long public schools under the control of FA? How far do they impact?

RQ2 Is there any difference about the impact of factors to MP of Vinh Long public schools under different levels of FA? Does the level of FA change the impact of factors to MP?

RQ3 How to improve the MP of Vinh Long public schools in the context of FA?

Based on these aforementioned discussions, the remainder of this research is structured as follows In Section 2, we provide insights into the primary theoretical inputs underpinning the research The next section highlights the main constructs and presents a set of hypotheses A discussion about the methods employed in this study is then described

in detail Our main episode emphasizing the result of SEM for MP is provided in section 5 The last section is ended with summarizing some concluding remarks, comments on limitations, and directions for future research

2 Theoretical background

2.1 Public school

In Vietnam, the management and regulation of the educational system are the responsibility of Government The national education system encompasses education from

pre-school to higher education Nursery, Primary, Secondary, and High schools depend on local governments With the diversity of level in education systems and numerous schools, most of the regions in the country are caused a much more constrains to the Government budget In addition, the Ministry of Education conducts the centralized administrative system whose structure is divided into various hierarchical levels Therefore, managing the performance of educational institutions like schools is not an easily to undertake due to the involvement stakeholders at different levels and with diverse interests and priorities, especially the significant dependence on the budget provision for current operation

This also leads to limitation in the optimization of the human and material resources

in accomplishing the goals in increasing school management, thus, in order to effectively manage the performance of the schools, one of the most important aspects which is worth encapsulating comprehensively is administration Hence, the idea of transferring powers to the educational institutions of the Government is increasingly recognized and advocated Generally, autonomy expresses the level of selections that an organization can address (Verhoest et al 2010) in managing resources through its own discretion and policies

As such, school autonomy was identified as decentralization of authority through relocating power structures from central or regional offices to school sites to allow school stakeholders to have their own decisions on resource utilization and school operations in a quickly changing academic environment There were two types of autonomy for agencies namely policy and management autonomy (Verhoest et al 2004) Whereas, the policy autonomy aspect focuses on independent discretion in policy implementation, management autonomy deals with the delegation of management functions

Moreover, management autonomy contained organizational, human resources, and

FA Of these, FA is described as a level of discretionary power over agency finances independent financing, and the decentralization of financial powers among the functionaries FA refers to its flexibility to raise financial resources and use them for agency activities (Verhoest et al 2010) In line with the global economic trend, Vietnamese decision makers seek ways to improve the efficiency and financial performance of the Vietnam education, the introduction of the Decree No 16/2015/ND-CP in 2015, which replaced the Decree No 43/2006/ND-CP promulgated in 2006, is one of the most prominent changes consisting new contents to consolidate these autonomies in organizing, staffs and financial mechanism and self-responsibility, intends to increase competition between public schools and to unlock untapped efficiency potential

2.2 Managerial performance

Performance of the entities tends to enhance significantly only when managers utilizes budget to allocate resources Thus, sufficient resource allocation for the subordinates will make more productive performance of the subordinates (Fisher et al 2002) MP is the output of the work undertaken by each of individual members in the organization through managerial activities namely planning, investigation, coordination, supervision, staffing, negotiation and representation (Wong-On-Wing et al 2010) As such, MP also demonstrated

the capacity of a manager working performance in management function in management functions for activities as their major duty (Anthony & Govindarajan 2001)

2.3 Foundation theory used in research

2.3.1 The contingency theory

Contingency theory which was discovered in 1950 through the leadership behavior research developed from the sociological functionalist theories of organization structure was carried out by Chenhall (2003) Since contingency theory explored the behavioral aspect

of an organization to elucidate how contingent factors namely culture, technology, and external environment had a dramatically influence on organizations designing and functioning (Ferreira & Otley 2005), it was defined as an important field of research in management accounting (Cadez & Guilding 2008) as well as organizational measurement and subunit measurement

2.3.2 The stakeholder theory

With the first appearance in 1963 in the memorandum at the Stanford Research Institute, the "stakeholder" concept was then recommended to be adopted by managers (Freeman 1984) Stakeholder theory was first explained in the seminal work of Freeman (1984), experienced extensive evolution in the 1990s through the works of numerous researchers The adoption of stakeholder theory will give the organization a better chance

to improve and enhance the matters concerned to more value for stakeholders and management the distribution of that value (Freeman 1984)

3 Hypotheses development and research model

Internal control The definition of IC involves in a series of effective actions when it

is established into the entity’s infrastructure, essential mechanisms provision to help understand risks in the context of the entity’s objectives, taking for granted the achievement

of objectives and minimizing the risk of failure Therefore, the IC system is reckoned as a management tool that serves to attain performance targets, precluding loss or misappropriation of resources (Nogueira & Jorge 2017) In other words, the objectives of the organization can be accomplished through better control activities which are all essential actions should be undertaken with the target to address risks (Saidu & Zabedah 2013) To

be more precise, the management accountants can make a report about different operations

in which extent patterns and causes of fraud, RM, fraud prevention, specifying fraud and responding to fraud in detail (Chartered Institute of Management Accountants 2002)

H1 Internal control has a positively significant impact on effective management accountant

Risk management RM is defined as the total process of specifying, controlling, and mitigating information system–related risks including risk assessment; cost and benefit analysis; and the selection, implementation, test, and security evaluation of safeguards Management accountants play significant role in developing and implementing RM and IC systems within their organizations (Chartered Institute of Management Accountants 2002) since their knowledge on what drives shareholder value in both monetary and nonfinancial

terms can potentially produce information to help their organizations define, track, and manage different types of risk In particular, some contribution of management accountants can create for managing risks namely compliance and legal, employee-related, market-price, credit and liquidity, operational, information technology and data security, reputation, and strategic risks (Bento et al 2018)

H2 Risk management has a positively significant impact on effective management accountant

Effective management accountant The effectiveness of management accountants’ contributions to ERM owing to the empirical study investigated their effectiveness across a wide range of ERM areas namely finance-related compliance programs; fiduciary and statutory requirements; supporting, managing and minimizing risk; driving the integration

of ERM with decision-making across the organization; enhancing internal controls; offering line managers with information regarding risks and outputs; conducting ERM for the accounting/finance function; measuring and improving the organization’s ERM processes; and analyzing and reporting the organization’s performance, including its related risks

H3 Effective management accountant has a positively significant impact on Managerial performance

Strategic leadership SL is a vital component in effective school management and leadership with a view to identify the vision and moral purposes of an organization and put them into practice Taking this into consideration, the school management, hence, should express teamwork and collaboration which are necessary elements in provision of higher quality education Additionally, school leaders have to increase SL in the context of autonomy mechanism Since they are not only primarily consulted in operative management in daily routine operations relevant to administration and pedagogy, but also requested for specifying targets of organization, human resource development, conducting, and assuring externally set the instructional rules In this regard, MP significantly based on management functions namely planning, organizing, controlling and leadership (Mahoney

et al 1963)

H4 Strategic leadership has a positively significant impact on Managerial performance

Management stakeholder Public schools have to pledge with a diversity of heterogeneous stakeholders in conducting their mandate Therefore, public schools are claimed to have a better understanding and involve stakeholders in a participatory manner

It is very critical for an organization to manage relationship with the stakeholders to foster them to conduct in ways that support the functions, targets and development of organization (Midin et al 2017) The more in value of stakeholders’ inner have been enhanced, the more increasing in the performance of management within the organisation will be achieved

H5 Management stakeholder has a positively significant impact on Managerial performance

Figure 1 Theoretical proposed model

4 Methodology

4.1 Procedures and scope of survey

The qualitative in-depth interview 8 experts were employed to increase insights on this subject Thematic analysis was performed to analyze interview data The findings from the interviews were then adopted to establish a structured questionnaire survey for collecting primary data These questionnaires provided was lasted from April in 2019 to June in same year in Vinh Long province and personally collected by the researchers

4.2 Sample and data collection

The questionnaire survey was used to collect data in this research The targeted respondents were accountants of Vinh Long public schools since almost all of the studies on management accounting have considered accountants as key respondents In addition, apart from undertaking the duty of financial accountants, they are responsible for providing useful information relevant to management or utilization budget legitimately and effectively due to the fact that they occupy commanding positions in their respective organizations and have access to detailed information regarding the functions, strategic development, the market and competitors of the entities The questionnaires were sent to

432 accountants in PES located in 8 districts and city in Vinh Long province to increase the response level Of those, 412 respondents completed the survey, resulting in a completion rate of 95.37% and a useable response rate of 4.63%

4.3 Variable measurement

The theoretical constructs of the proposed model were measured through multi-item scales validated in prior literature and modified as follows As such, the study has tried to measure the RM by 5-item scale, IC by 8-item scale, EMA by 9-item scale, SL by 10-item scale, MS by 5-item scale, and the managerial performance by 6-item scale The items of RM were adapted with some modification from Bento et al (2018) The items of IC were adapted

with minor adjustment from COSO ERM Framework (2004), which was developed by Datar and Rajan (2014) The items of EMA were adapted with some modification from Bento et al (2018) The items of SL were adapted with some modification from Sotirakou and Zeppou (2006) The items of MS were adapted with some modification from Sotirakou and Zeppou (2006) The items of MP were adapted with some minor adjustment from Agbejule (2005)

The 5-point Likert scale was employed in this research, as such, the respondents were requested to rate the extent to which they applied in each item of the scale (from 1

“completely disagree” to 5 “completely agree”) On the other hand, MP is measured by an instrument using a self-evaluation questionnaire Thus, respondents were demanded to rate

on a five-point Likert scale their own perceived performance (from 1"very poor" to 5

"excellent").To control for a possible size effect, the degree of FA applied in this study were based on the level stipulated in the Decree No 16/2015/ND-CP in 2015 namely FA in respect

of public administrative units of which recurrent expenses are covered by the government;

FA in respect of public administrative units which cover a part of their own recurrent expenses; FA in respect of public administrative units that cover their own recurrent expenses; FA in respect of public administrative units that cover their own recurrent and investment expenses

4.4 Data analysis tools and techniques

In this research, the SEM was set up using the maximum likelihood approach and conducted a two-step procedure requested Anderson and Gerbing (1988) Statistical analysis tools namely EFA, CFA, and SEM were applied with the assistance of SPSS 25 and AMOS 24 software in order to carry out the tests relevant to reliability and SEM

5 Results of research

5.1 Descriptive statistics

Ultimately, 412 completed questionnaires were received from 129 males and 283 females All respondents were accountants The majority of respondents were in the age from 30 to less than 35 years old (34.95 percent) In terms of year of experience, 73 respondents (17.72%) belong to “5-10” group, 92 respondents (22.33%) are “10-15” group,

203 respondents (49.27%) are the “Above 15” group and the remaining 44 (10.68%) are classified as “Below 5” The level education ranges of the sample, of which 275 participants had undergraduate degree and 137 participants had post graduate degree The results consist of 27.43 percent for Nursery school, 45.87 percent for Elementary school, 20.15 percent for Secondary school and 6.55 percent for High school Approximately 65 percent

of the selected organizations had their recurrent expenses covered by the government while

35 percent was left for the schools of which a part of recurrent expenses was covered by government In addition, the survey included the characteristics relevant to the size of organization, of which 47.33 percent was over “41 employees” group, while 29.13 percent was “31-40 employees” group, and the remainder belongs to the other two groups with lower 31 employees A detailed description of the respondents’ demographic characteristics was depicted in Table 1

5.2 Confirmatory phase: large-scale study

All items of the constructs loaded in the measurement model significantly The measurement model yielded a model fit with df = 687, p<0.001 and acceptable values of CMIN/df = 1.450; CFI = 0.959; TLI = 0.956; GFI = 0.888 and RMSEA = 0.033

To test convergent validity concerning the responses given to the measured items, (1) reliability of the items associated with each factor in the scale, (2) composite reliability of each factor, and (3) average variances explained were checked The reliability of each item

is determined by its factor loading in the factor it falls under In this study, the factor loadings of the variables vary from 0.603 to 0.848 According to Hair et al (2010), a factor loading of over 0.50 is enough to decide that the item is reliable

As a result, it has been concluded that convergent validity is sufficient at the item level for each factor Secondly, composite reliability of each construct was investigated Using composite reliability is recommended for calculating reliability for each construct in SEM studies and was indicated that there was composite reliability when alpha value was not less than 0.70 (Nunnally & Berstein 1994) The composite reliability values calculated for each construct in this research vary from 0.859 to 0.909 Finally, the average variance was considered enough if this value is not less than 0.50 (Fornell & Larcker 1981) The values of average variance extracted (AVE) vary from 0.501 to 0.603 for all groups in this research Table 2 showed that factor constructs for all groups had convergent validity

It is essential to compare the shared variance between the latent variables with AVE for each latent variable in order to ensure discriminant validity (Farrell 2010) The values on the rows and columns outside diagonals are correlations between the constructs Under discriminant validity, the values on diagonals have to be greater than their own row and column values (Fornell & Larcker 1981) Thus, discriminant validity of the measurement model was supported by the results

5.3 Result of the SEM

Overall, results of hypothesis testing depict a model fit with acceptable values, the structural model also displayed parsimony when the value of chisquare/df fell in the range

of 1.0 to 2.0 (Hair et al 2010) Once fit measures like RMSEA, GFI, TLI, and CFI met the necessary thresholds, the structural model was indicated to have a good fit

Once the model fit measures were in correspond to the stipulated thresholds, the causal relationships of constructs were tested Results of this study depicted that IC was found to have a positive and significant influence on EMA (β = 0.221, p < 0.001), which supported H1 RM was found have a positive effect on EMA (β = 0.170, p < 0.01), hence supported H2 The result also proved the relationship between MP and its determinants Particularly, EMA was discovered to have a dramatically impact on MP (β = 0.180, p < 0.001), consequently supported to the H3 In addition, SL was found to affect MP (β = 0.247, p < 0.001), as a result supported H4 With respect to MS, it was found that it had an influence

on MP (β = 0.179, p < 0.001), thus supported H5

For this, another consequence of SEM models was generated with the appearance of the control of FA on the MP It could be clearly seen there were dramatically differences in the measurement value of majority of components between two Models Therefore, MP was proved to be controlled by FA The details of above mentioned findings were shown in Table

4

The Bootstrapping technique was employed with a total of 1,500 random observations generated from the original sample and selected bias-corrected Bootstrapping method with 95 percent confidence intervals in the estimation of the proposed model From the bias-corrected bootstrap test result illustrated in Table 5, it was proved that the estimates

in the model were reliable

In accordance with prediction, the findings proclaimed that the higher exploration and enhancement in EMA, SL, and MS can address the more MP increases Consistent with previous research studies, the implementation of IC and RM will improve and maintain the management accountant performing in an effective way (Bento et al 2018) Besides, the strategic leadership was the critical component in empowering the MP as school leaders are increasingly viewed as a key mechanism of school improvement MS is considered as another matter which deserves more attention as the result also proves the significant influence on MP In accordance with prediction, the findings proclaimed that the higher exploration and enhancement in EMA, SL, and MS can address the more MP increases Consistent with previous research studies, the implementation of IC and RM will improve and maintain the management accountant performing in an effective way (Bento et al 2018) Besides, the SL plays the critical part in empowering the MP since the school leaders become increasingly important in mechanism of school improvement Simultaneously, MS is considered as another matter which deserves more attention as stakeholders more likely to reveal valuable information that can lead to greater enhancement in MP

Additionally, good stakeholder relations enable a firm to enjoy superior financial performance over a longer period of time, but that they also help poorly performing firms

to improve their performance more quickly (Choi & Wang 2009) Due to the concern that public school will encounter management performance in the context of autonomy, of these the FA deserves more attention In this research, an effort to modify the paradigm of managerial performance in public education was made, focusing on the determinants and measurement the extent to which each of determinants has an impact on MP in the context

of financial autonomy As a result, there was several substantial differences in the extent in influence of each determinant of MP under the condition of FA In the context of FA, the IC and the RM seems to unchanged their impact on the performance of management accountant In other words, the accountants must take notice of quality of IC and RM activities in undertaking their responsibilities Contrary to our expectation, EMA, MS, and

SL seemed to make less contribution in enhancing the MP In other words, the school leaders and management accountants seem to be hesitated in exploration all their capacities and investment for all activities By the same token, MS may somehow lead to more transactions costs and increase the resources needed to create and enforce contracts requiring detailed

monitoring School leaders tent to take more caution into consideration in making strategic decisions which were based largely on their own financial resources

6 Conclusions and discussion

Based on the exploration of the model using survey data from 412 public schools conducted in this research, we come to the conclusion that there was a significantly insensible impact of FA on the MP The analysis makes in relation to the facts found in the empirical investigation among public schools in Vinh Long province in the progress of attempting in get higher number of autonomous local administrative achievement The results provide some useful implication in improving and enhancing MP

For the managers also, this study contributes to several managerial implications As school leaders are increasingly viewed as a key mechanism of school improvement Indeed, they also mutually agree that the wisdom and practices of school leadership are vital to the successful functioning of a school Therefore, there is an urgent claim for leaders to possess fully comprehension on all the policies and the right leadership style Second, the managers need to pay attention to identifying specific capabilities required to improve performance Managers should be acquainted with the process of FA development in order to understand the influence of financial autonomy on MP The effects of this autonomy will reduce the degree of dependency on governmental funding Hence, the government should consider

on supplying meaningful instructional supports to schools on the progress on comprehensive autonomy namely supports given to school leaders (training, supervision, coaching), and useful approach in allocation of time, material and human resources Furthermore, in order to manage the risk of fraud, the organizations are required to consider both prevention and detection fraud in designing an effective strategy Thus, the result of the model used in this study provides managers with useful understanding to enhance the performance as well as competitive advantages

There are also some relevant matters for school leaders to regard, which firstly is to develop the role and skills of accountant, especially management accounting skills in the organization although there is no specific title of management accountant within the public schools at this time, the accountant in the organization still take on this responsibility In the context of FA, management accountant has significant role in pursuing business survival and success, managing the risk of fraud, they are required to be proactively involved in value creation activities and recommend solution to the management Management accountants need to react to changes in business environment and expectation from management in an organization Thus, management accountants should receive enough training, which is very good basis for implementing anti-fraud program and adding value

to their organizations

Another implication for school leaders is to conduct the equal treatment with all stakeholders and highly-respected on their interest Therefore, school leaders should take the benefit and the rights of stakeholders into consideration This also helps managers to draw together stakeholders in efficient manner to achieve financial objectives as