The Impact of Management Accounting Practices on Firm Value Creation: The Role of Contingency Factors and Institutional Investors

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Accounting, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran.

2 Assistant Prof., Department of Accounting, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran.

10.22059/acctgrev.2025.385557.1009046

Abstract

Objective
Iranian companies are venturing into competitive global markets, making effective resource management and cost reduction more crucial than ever. Without adopting modern management accounting practices, companies cannot utilize their resources effectively or develop the necessary strategies for international competition. Furthermore, institutional investors, who play a pivotal role in financial markets, significantly influence managerial decisions and corporate strategies. With access to extensive financial resources and in-depth analyses, these investors often seek to enhance corporate performance and increase shareholder value. By advocating for greater transparency and leveraging advanced management accounting tools, they can steer organizations toward more optimal and efficient decision-making. This study aimed to examine the role of management accounting practices in firm value creation and the impact of institutional investors on this relationship, considering contingency factors such as the firm’s lifecycle and size. Given the importance of these factors in managerial decision-making and their impact on long-term firm performance, the present research sought to identify the relationships among these variables.
Methods
A quantitative approach was employed to analyze the relationships in this study, using adapted measurement models to evaluate management accounting practices and firm lifecycle indicators. The study's statistical sample included 175 companies listed on the Tehran Stock Exchange over 10 years (2013–2022). Data were analyzed using regression analysis to determine the impact of contingency variables and institutional investors, utilizing EViews software.
Results
The results indicate that aligning management accounting practices with the business environment, while potentially reducing short-term company performance (return on assets), positively impacts company performance in the long run. This finding suggests that companies should not base their decisions solely on short-term outcomes; rather, they should adopt a long-term strategy that involves adapting management accounting practices to their business environment. Additionally, this study examines the effect of institutional investors on management accounting practices, revealing that as institutional ownership in a company increases, management accounting practices become less aligned with the business environment. This misalignment may be due to institutional investors' preference for conservative management accounting approaches.
Conclusion
This study demonstrates that the impact of management accounting practices on firm value creation is contingent upon factors such as the firm’s lifecycle and size. In other words, management accounting practices alone are not sufficient to create sustainable value; rather, they must align with the specific needs of each stage of the organization's lifecycle. Moreover, the findings indicate that an increase in the percentage of institutional ownership is generally associated with a decrease in the use of management accounting practices, as institutional investors often exert pressure to focus on short-term profitability. This may limit innovation and fundamental changes in practices. Furthermore, ownership concentration among major institutional shareholders can lead to improved oversight and strategic decision-making. Factors such as economic volatility and lack of transparency can also drive institutional investors to focus more on short-term profits, affecting the quality of accounting practices and managerial decisions. This research emphasizes the importance of a contingency approach in management accounting and suggests that managers should pay particular attention to aligning accounting systems with environmental conditions and organizational characteristics. Particularly in companies with institutional ownership, it is essential for managers to adequately address the needs and expectations of this group of shareholders.

Keywords

Main Subjects

References

 
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Accounting and Auditing Review
Volume 32, Issue 4
2025
Pages 651-690

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