UNIVERSITY OF ECONOMIC HO CHI MINH CITYVO TAN LIEM CHARACTERISTICS OF MANAGER IMPACT ON STRATEGIC CHOICES, USING MANAGEMENT ACCOUNTING SYSTEM INFORMATION AND FINANCIAL PERFORMANCE IN VIE
Trang 1UNIVERSITY OF ECONOMIC HO CHI MINH CITY
VO TAN LIEM
CHARACTERISTICS OF MANAGER IMPACT ON STRATEGIC CHOICES, USING MANAGEMENT ACCOUNTING SYSTEM INFORMATION AND FINANCIAL PERFORMANCE IN VIETNAM
MANUFACTURING ENTERPRISES
Major: Accounting Code: 9340301
DOCTORAL THESIS - SUMMARY
Ho Chi Minh City – 2021
Trang 2Supervisor: 1 Dr Pham Ngoc Toan
2 Dr Nguyen Thi Thu
Reviewer 1:
Reviewer 2:
Reviewer 3:
The thesis will be presented to the University Dissertation Board at:
At… hours… day… month… year 20
The thesis can be found at the library:
Trang 3
1 Statement of Problems.
Among the informations managers have for day-to-day decision making and strategy implementation,MAS information is considered very useful to support for them in decision making (Vo & Nguyen, 2020a;Demski, 2008) Broad scope MAS information originated from inside and outside of the organization,financial and non-financial in nature, and on historical and future events Timely MAS information wasprovided at the right time, MAS information is integrated and aggregated to provide vertical and horizontalinformation for the managers to have an overview of organization (Chenhall & Morris, 1986) However,there are many factors and contexts affecting managers 's behavior of using MAS information in makingdecisions that improve financial performance (Chenhall, 2007) Notably, factors such as uncertainenvironment, organizational structure (Gul, 1991; Mia & Chenhall, 1994), information technology (Mia &Winata, 2008), size of organization (Mia & Winata, 2008), culture (Patiar, 2005), organizational strategy(Chong & Chong, 1997) are considered to have an impact on managers' behavior using MAS information.Recently, many studies on human behaviors have begun to pay attention to demographic and psychologicalcharacteristics, because it determines the behavior of the upper managers (Wangrow et al., 2015) However,the number of studies on upper manager ‘s characteristics affect on behavior of using MAS information isstill quite limited (Hiebl, 2014, Le et al., 2020, Tran & Nguyen, 2020)
In the world, there are very few studies examining the influence of upper managers ‘s characteristics
on the choice of an organizational strategy (such as prospector strategy), as well as on the behavior of usingMAS information (Hiebl, 2014) and in Vietnam (Nguyen et al., 2017; Vo & Nguyen, 2020a, 2020b).Besides, a match between the characteristics of upper managers, choiced of prospector strategy, behavior ofusing MAS information to implement a strategy will have strong effects on organization ‘s financialperformance (Hambrick & Mason, 1984; Hiebl, 2014) has also been neglected Thus, from the stated
objective characteristics, it is necessary to determine: Which characteristics of upper managers have an
impact on the choice of prospector strategy and the behavior of using MAS information? How does the choosing of prospector strategy affect on the using of MAS information? How do the characteristics of upper managers, the behavior of choosing prospector strategy, the using MAS information affect the financial performance of the organization?
In addition, Rotter (1966) divided the human psychology into people with internal locus of control(people who believe that, in their lives, events occur largely as a result of their own actions and themselvesefforts) and vice versa, people with external locus of control (who believe that their fate is determined byluck, by other people, or by chance inadvertently) The ILOC psychological was suggested by Hambrick &Finkelstein (1987, p 379) that it would mediate the relationship between upper managers ‘s characteristicsand behavior of using information from a complex administrative system in an organization MAS isconsidered as a complex administrative system in an organization (Hambrick & Mason, 1984 and Chenhall
& Morris, 1986) Therefore, how are the moderator role of ILOC in the relationship between upper managers
‘s characteristics and the behavior of using MAS information?
From the above questions, the thesis is built based on the review of previous studiesaccording to the following groups: (1) characteristics of upper managers and strategic choice,(2) the impact of characteristics ‘s upper managers on behavior of using MAS information, (3)choosing a prospector strategy that affects the behavior of using MAS information and
Trang 4financial performance, (4) the moderator role of ILOC in the relationship between thecharacteristics of upper managers and the behavior of using MAS information.
Researching the behavior of using MAS information of upper managers in Vietnamese manufacturingenterprises should be done because:
Firstly, with an emerging economy line VietNam, it has many distinct characteristics Vietnam alsohas a diverse culture because of its long history of foreign influences (China, France and the United States)
in different fields (Hoang, 2008; Nishimura, 2005; Yamazawa, 2012) Therefore, the behavior of using MASinformation of upper managers in Vietnam will have distinct characteristics Among the upper managers ‘scharacteristics (age, educational background, risk taking propensity, and ILOC), and strategy (choice ofprospector strategy) were considered because (1) all the mentioned factors affecting on the behavior of usingMAS information have been little studied and (2) in Vietnam, it will have a different effect than othereconomics
Secondly, Vietnamese manufacturing enterprises need to understand: (1) the impact of uppermanagers characteristics and choiced of prospector strategies on the behavior of using MAS information canhelp upper managers use this information more effectively while decision making, which can improve thefinancial performance of the organizations and (2) understanding the relationships between age, educationbackground, risk taking propensity, ILOC, the choice of prospector strategy, the behavior of using MASinformation and the financial performance of the organization will help them to design an appropriate MAS.Thirdly, in the Enterprise White Book 2020, the number and contribution to GDP of manufacturingenterprises is significant (accounting for 22% of VietNam 's GDP) and is considered to play an importantand leading role in the economy (Ministry of Planning and Investment, 2020, page 19) Therefore, the study
of this type of enterprise will help develop the general economy of the country
Fourthly, at present, manufacturing enterprises in particular and enterprises in general are continuouslyinnovating and creating products to meet market demands in order to increase competitiveness as well as tosurvive and sustainable development in a volatile and competitive environment in Vietnam (Duong, 2019).Therefore, a strategy with innovative and creative as the prospector strategy is being chosen and applied bymany businesses Besides, the application of MA in manufacturing enterprises in Vietnam is still limited.The accounting system is still mixed between FA and MA, causing difficulties in the process of applying
MA in a scientific and reasonable way for enterprises, as well as upper managers who are not aware of theimportance of MA information in decision making (Ngo, 2019) In manufacturing enterprises, theparticipation of upper managers in the strategic selection process as well as the design, construction and use
of information from MAS is important to the success of each enterprise (Nguyen, 2018) On the other hand,the behavior of choosing strategy and using MAS information is influenced by characteristics of uppermanagers Therefore, the study of upper manager ‘s characteristics affecting the behavior of choosing aprospector strategy and using MAS information in manufacturing enterprises in Vietnam is worthy ofattention
2 Research objectives and research questions
Research objectives:
RO1: Determining the upper managers ‘s characteristics (demographic and psychological) affect the
behavior of choosing prospector strategy, using MAS information and financial performance in Vietnammanufacturing enterprises
Trang 5RO2: Measure the impact of upper manager ‘s characteristics on the behavior of choosing prospector
strategy, using MAS information and financial performance in Vietnam manufacturing enterprises
RO3: Measures the impact of the behavior of choosing the prospector strategy and using MAS information
on financial performance in VietNam manufacturing enterprises
RO4: Determining the moderator role of ILOC in the relationship between upper managers ‘s characteristics
and behavior of using MAS information
RO5: Measure the moderator effect of ILOC in the relationahipn between upper manager ‘s characteristics
and the behavior of using MAS information
Research questions:
RQ1: Which are the characteristics of upper managers that affect the behavior of choosing prospector
strategy, using MAS information and financial performance in Vietnam manufacturing enterprises?
RQ2: How do the characteristics of upper managers affect the behavior of choosing a prospector strategy,
using MAS information and financial performance?
RQ3: How do the choice of prospector strategy affect the behavior of using MAS information and financial
performance, as well as the impact of the behavior of using MAS information on financial performance?
RQ4: What is the role of ILOC in the relationship between upper managers ‘s characteristics and the
behavior of using MAS information?
RQ5: How are the degree of moderator of ILOC in the relationship between upper managers ‘s
characteristics and behavior of using MAS information?
3 Subject and scope of research.
Subject research: are the characteristics of upper managers, prospector strategy, using MAS
information, financial performance, ILOC and their mutual effects In which, the behavior of using MASinformation is the main research factor in the thesis That behavior of using MAS information is influenced
by the characteristics of upper managers and the choice of prospector strategy
Scope of research:
+ Space: The scope of the survey is mainly in the area where many manufacturing enterprises are
concentrated in the south, central and northern regions of Vietnam and only surveyed individuals who areCEOs, general directors and directors in Vietnam manufacturing enterprises (medium and largemanufacturing enterprises), because these enterprises have high demand and enough resources for building aMAS
+ Time: from 1/2018 to 12/2020.
4 Methodology research.
Using empirical research framework because with experimental data, it is suitable in the process ofbuilding and testing the proposed model Mixed methodology is a method that applies both of the abovemethods a flexible in order to design and test scientific theories (Nguyen Dinh Tho, 2013) In this respect,when the proposed hypotheses are quite numerous, the quantitative research is appropriate However, someconcepts are still new in Vietnam (such as the variable MAS), so it is necessary to reevaluate and developthese concepts in Vietnam With this feature, qualitative method is a suitable method to applied in this study
to identify research gaps, systematize theoretical basis to build research model scientifically as well as adjustthe scales to suit with the environment and characteristics of manufacturing enterprises in Vietnam Morespecifically, the literature review aims to identify gaps in some relationships between: upper managers ‘scharacteristics (Age, educational background, risk taking propensity) – Strategy (Prospector strategy) –
Trang 6Behavior of using MAS information – Financial performance and the moderator role of ILOC in somerelationships between upper managers ‘s characteristics (Age, educational background, risk takingpropensity) – behavior of using MAS information As well as arguing and explaining the application of UET
is the fundamental theory to build research model And the adjustment of the scale is done through groupinterviews Quantitative research is used to test the proposed hypotheses to answer for the initial questions ofthis study
5 Contribution.
About theoretically:
- Built a model of upper managers ‘s characteristics affecting the behavior of choosing prospectorstrategy, using MAS information and financial performance of VietNam manufacturing enterprises This is acombination of: people characteristics / accounting (MAS) / Marketing (prospector strategy)
- Characteristics of upper managers will affect their perception and behavior Therefore, thecharacteristics of upper managers themselves strongly influence the behavior of strategic choice and use ofMAS information in decision making
- Clarifying the role of upper managers ‘s characteristics affect the behavior of using MASinformation to implement the prospector strategy chosen by them, their interactions impact on financialperformance in Vietnam manufacturing enterprises
- Empirical results on the behavior of using MAS information to implement the strategy with thesurvey subject being upper managers, while many previous studies on the behavior of using MASinformation have paid little attention to this subject in Vietnam
- The model is built by using UET A theory that has received little attention in the field of accounting
in Vietnam
- When upper managers make decisions, the psychological of upper managers (ILOC) plays animportant role in the behavior of using MAS information
About managerial, when choosing and implementing strategies, MAS information will help upper
managers gain relevant insights Therefore, this result indicates a perfect combination of upper managers ‘scharacteristics /strategic choice /using MAS information that can improve the financial performance of theorganization, as well as help Vietnam manufacturing enterprises to design a MAS is suitable for thecharacteristics of upper managers To adjust the MAS in accordance with the characteristics of uppermanagers and strategic characteristics of the organization
Trang 7CHAPTER 1: RESEARCH OVERVIEW
1.1 Overview of international research.
1.1.1 Characteristics of upper managers related to the management accounting system.
1.1.1.1 Research on internal and external characteristics of organizations and management accounting systems are based on contingency theory.
Many studies have examined many factors in different contexts affect the behavior of using MASinformation such as: Mia & Goyal (1991); Soobaroyen & Poorundersing, (2008), Agbejule (2005),Bangchokdee (2011); Chong & Chong, (1997); Bouwens & Abernethy (2000); Heidmann et al (2008), Chia(1995); Soobaroyen & Poorundersing (2008), Bangchokdee (2011), Naranjo-Gil & Rinsum, (2006), Rasid &Associates (2011), Novas, Sousa & Alves (2012), Ismail et al (2018); Drobyazko et al (2019)
1.1.1.2 Researches on the characteristics of upper managers and management accounting systems are based on Upper Echelons Theory.
1.1.1.2.1 Researches on demographic characteristics of upper managers and management accounting systems.
A number of studies have investigated the impact of top management team characteristics Gil & Hartmann, 2006, 2007b; Lester et al., 2006; Kyj & Parker, 2008; Speckbacher & Wentges, 2012; Lee
(Naranjo-et al., 2013; Naranjo-Gil, 2015) Some studies examined the characteristics of individual upper managers(including CEOs and/or CFOs) to MCS or MAS (Naranjo-Gil & Hartmann, 2007a; Naranjo-Gil et al., 2009;Pavlatos, 2012; Abernethy & Associates, 2010; Burkert & Lueg, 2013; Laitinen, 2014; Hiebl & Associates,2017; Zor & Associates, 2018; Kalkhouran & Associates, 2015; Kalkhouran & Associates, 2017; Ojeka &Associates, 2019) and a number of studies have investigated the characteristics of two senior executives(CEO, CFO) and the entire top management team as well as the characteristics of the chief informationofficer (Lee & Associates, 2013) and surveyed simultaneously two senior managers (CEO, CFO) andmarketing director (Pavlatos & Kostakis, 2018)
While accounting and governance control systems often fall within the CFO's primary area of responsibility,CEOs also influence the design and use of those systems (Heibl, 2014)
1.1.1.2.2 Researches on psychological characteristics of upper managers in the field of management accounting.
Currently, in the field of MA based on UET to examine the impact of upper managers ‘s psychologicalcharacteristics on the behavior of designing MAS and using MAS information is still quite limited, but it hasjust been used a lot in the field of financial accounting and auditing (Plöckinger et al., 2016) Psychologicalcharacteristics of upper managers are difficult to measure accurately (Hambrick, 2007) Psychologicalcharacteristics commonly considered in financial accounting and auditing include: overconfidence,selfishness, risk aversion and risk taking
1.1.2 Researches on strategic choices of upper managers
Regarding the characteristics of upper managers affect strategy choices that has been implemented.Naranjo-Gil & Hartmann (2007b), Speckbacher & Wentges (2012), Naranjo-Gil & Hartmann (2007a),Papadakis, Francioni & Associates (2015), Strandholm & Associates (2004), Goll & Associates (2008) ,Finkelstein & Hambrick (1990), Papadakis (2006)
Besides, a number of studies have been interested in the impact of the strategy on MAS, MCS Such
as Naranjo-Gil & Associates (2009), David Naranjo-Gil & Hartmann (2006), Chong & Chong (1997),
Trang 8Bouwens & Abernethy (2000).
The line of research about strategy impact on organizational performance is interested by manyscholars such as Naranjo-Gil (2015), Soltanizadeh & Associates (2016), Bangchokdee (2011)
1.1.3 Researches related to financial performance.
Based on contingency theory: Enterprise characteristics – Strategy – MAS – Financial performance:
Naranjo-Gil et al (2009), Pavlatos et al (2018), Naranjo-Gil et al (2006), Ajibolade & associates, (2010).Besides, the research group on the relationship between: Strategic – MAS – Financial Performance isoutstanding with the study of Bangchokdee (2011)
Based on UET, characteristics of upper managers - behavior of use MA information - financial
performance researched by Kalkhouran et al (2015, 2017), characteristics of upper managers Strategy financial performance researched by Strandholm et al (2004) In the relationship between Strategy – MAS –Financial performance highlights by the research of Naranjo-Gil (2015), Soltanizadeh et al., (2016)
-1.1.4 Researhes on the moderator role of managerial discretion.
Managerial discretion is initially presented by Hambrick (2007) through three groups of factors: (1)environmental characteristics; (2) organizational characteristics; (3) personal characteristics of the uppermanager (Hambrick & Finkelstein, 1987, p 379)
The group of environmental characteristics is quite diverse in the field of governance (Wangrow et al.,2015) Prominent among them, Datta & Associates (2005); Goll & Associates (2008); Haleblian &Finkelstein (1993); Messersmith & Associates (2014), Datta & Associates (2005) \
The group of characteristics belongs to the prominent organizational characteristics with research byRajagopalan (1997); Finkelstein & Hambrick (1990); Campbell & Associates (2012) Rajagopalan (1997)The group of personal characteristics of upper managers stands out with the research of Crossland &Chen (2013); Crossland & Hambrick (2011); Fisher (1996) and Chong & Eggleton (2003) Crossland &Chen (2013)
1.2 Viet Nam researches on management accounting system.
1.2.1 Researches related to management accounting
Regarding construction, design and completion of MA as studied by Nguyen (2014), Doan (2012);Huynh (2008); Wang & Huynh, (2013), Thai (2018), Tran (2016), Nguyen (2019)
1.2.2 Researches related to the management accounting system.
Some prominent studies are Nguyen et al., (2017), Nguyen (2018), Tran & Nguyen (2019) and Le &Nguyen (2020)
Regarding demographic characteristics, the age and educational affect on the use of MAS have not beenconsidered Regarding the psychological characteristic of risk-taking propensity, it deserves more attention,especially in the Vietnam environment that is always subject to many unstable influences from the outside
1.3.2 Moderator role of managerial discretion.
Trang 9ILOC contribute to explain and influence of the behavior ‘s upper managers regarding the effective of usinginformation (Lefcourt, 1982) In particular, ILOC has been confirmed by Hambrick and Finkelstein (1987, p.379) to have a moderator role in the relationship between characteristics of upper managers and the complexadministrative system of the organization (MAS is considered an complex administrative system), but themoderator role of ILOC has not been studied (Wangrow et al., 2015; Hiebl, 2014; Vo & Nguyen, 2020a;2020b).
1.3.3 Financial performance in the research model.
The financial performance of enterprises is also strongly influenced by the characteristics of upper managers,strategies choiced and complex administrative systems (Hambrick & Mason, 1984; Hiebl et al., 2014; 2017).Although, based on UET, financial performance is proposed as dependent variable (Hambrick & Mason,1984), control variable (Burkert and Lueg 2013) or as a prerequisite for the use of MAS (Naranjo-Gil &Associates, 2009) However, to date, there have been few studies analyzing the financial performance of theorganization (dependant variable) affected by the characteristics of upper managers or affected by thecomplex administrative system/strategy of the organization ( Vo & Nguyen, 2020b) Hiebl (2014) alsosuggests that a high fit between: upper manager ‘s characteristics - strategy - complex administrative systemwill lead to better financial performance for the organization
1.3.4 There is a lack of researches in Vietnam on the characteristics of upper managers in the field of management accounting.
Characteristics of uppers managers affect the behavior of choosing prospector strategy, using MASinformation, as well as affecting financial performance However, in Vietnam it is still very limited in thisaspect In particular, in Vietnam, although interested in the behavior of using MAS information, they arerelying on other theories such as resource base theory, knowledge-based and dynamic capacity perspective,but have not used UET Therefore, the use of UET to consider the behavior of choosing a prospector strategyand using MAS information in Vietnam is a big gap that needs to be completed
CONCLUSION CHAPTER 1
Chapter 1 has reviewed the researches related to the characteristics of upper managers and strategy, MASand financial performance of the organization, the basis for identifying gaps In chapter 2, the theory used forthe thesis and hypothesis building, research model building is presented.
CHAPTER 2: THEORETICAL BASIS 2.1 Characteristics of upper managers.
2.1.1 Demographic characteristics of upper managers.
CEO, Director and General Manager are certainly indispensable and very important people in everyorganization (Hambrick & Mason, 1984) Therefore, they are selected as upper managers who will chooseand implement the organization's strategy
Due to the important roles of age, the educational background of upper managers and the results arenot consistent This study selected age and educational background as the upper managers ‘s demographiccharacteristics that affect the behavior of choosing strategies, using MAS information and financialperformance to conduct the research
2.1.2 Psychological characteristics of upper managers.
Trang 10The Jackson Personality Inventory (JPI) psychological tool was first published in 1976, revised andrepublished in 1994 Risk-taking propensity include four dimensions: physical, monetary, and social andethical (Jackson et al., 1976) This study selected the propensity to accept administrative risks as apsychological feature of upper manager that needs to be studied.
2.2 Prospector strategy.
Miles & Snow have also shown that the prospector strategy is an effective strategy because the futureneeds of the external environment are need to be rapidly and proactively adapted by the organization Duringthe analysis of each strategic feature, Miles & Snow (1978) assessed the prospector strategy as having thehighest risk because this strategy requires a lot of resources and if left unchecked, good monitoring willcause damage businesses
2.3 Information characteristics of the management accounting system.
The MAS provides information for operational planning, control and performance measurement.There are different definitions of MAS (Table 2.1)
Table 2.1: MAS definition
Chenhall (2003) Use MA systematically to work towards organizational goals
Chenhall & Morris
Organizational performance includes financial and non-financial performance (Bangchokdee et al., 2011) In
it, financial performance refers to how an organization achieves its financial goals, including improvingprofitability, reducing costs, increasing revenue, and enhancing asset utilization (Kaplan & Norton, 1996); it
is assessed using financial metrics such as ROI, ROA, ROS, revenue growth and operating profit (Hoque &James, 2000; Nguyen, 2018)
2.5 Upper Echelon Theory.
The UET model (Figure 2.1) includes the premise that organizational characteristics, upper managerscharacteristics (psychological and demographic), Organizational output or strategic choice, and thedependent variable are organization performance In which, the characteristics of upper managers areinfluenced by conditions internal and external of the organization, which in turn determine the behavior ofupper managers and influence organizational ‘s output or strategy Ultimately, decisions that will lead to theachievement or success of the organization they run
Trang 11Upper echelon characteristics Strategic choice/ Outcomes
Figure 2.1: Framwork of Upper Echelon Theory
Source: Hambrick & Mason (1984, p.198)
Trang 122.6 Relationship between upper managers ‘s characteristics and choice of prospector strategy.
2.5.2 Giả thuyết nghiên cứu.
H1: The younger upper manager, the more to choose prospector strategy
H2: The more upper managers have business orientation education background, the more they will chooseprospector strategy
H3: Upper managers with the more risk-taking propensity, the more they choose prospector strategy
2.7 The characteristics of senior managers affect the behavior of using management accounting system information
2.7.1 Age characteristics and educational background of upper managers.
2.7.2 Risk-taking propensity.
2.7.3 Research hypothesis.
H4: The upper managers with older, the lower of the behavior in using MAS information
H5: The upper managers with the more business-oriented education background, the higher of thebehavior of using MAS information
H6: The upper managers with the more risk-taking propensity, the higher of behavior of using MASinformation
2.8 The relationship of prospector strategy and using MAS information
2.8.1 Feature
Figure 2.3: Impact of upper managers ‘s age, educational background on using MAS information
Source: Adjusted from Hambrick & Mason (1984)
Figure 2.4: Impact of risk-taking propensity on the using MAS information
Source: Adjusted from Hambrick & Mason (1984)
Demographic
characteristics
(Age, Education
background)
Complex administrative system
(Using MAS information)
Psychological characteristics
(Risk taking propensity) Complex administrative system (Using MAS information)
Upper managers ‘s
characteristics
(Age, Education background,
risk taking propensity)
Figure 2.5: Model of upper managers ‘s characteristics –Prospector strategy – MAS.
Source: Adjusted from Hambrick & Mason (1984)
Strategic choice
(Prospector strategy)
Complex administrative system
(Using MAS information)
Figure 2.2: The impact of upper managers ‘s characteristics on the choice of prospector strategy
Source: Adjusted from Hambrick & Mason (1984)
Upper managers ‘s characteristics
(Age, Education background, risk taking propensity)
Strategic choice
(Prospector strategy)