The Effect of Contingency Fit and the Importance and Attention to Management Accounting Practices and Tools on Firm Performance

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Accounting, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

2 MSc., Department of Accounting, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

10.22059/acctgrev.2026.404263.1009168

Abstract

Objective
Management accounting represents a foundational pillar in organizational decision-making processes and plays a decisive role in shaping both strategic and operational directions of firms. It not only provides essential information for planning, control, and performance evaluation, but also equips managers with precise financial and non-financial analyses to anticipate future conditions and make informed decisions. In this context, the present study investigates the effect of management accounting practices and instruments on corporate financial performance, with a specific focus on the level of Management Accounting Practices Importance (MAPI). Particular emphasis is placed on the contingent fit (Fit) of each practice with environmental conditions, organizational structure, and strategic characteristics, analyzing their role in enhancing financial outcomes.
Methods
The study covers the period from 1398 to 1402 in the Iranian calendar (corresponding to 2019–2023). The statistical population consists of firms listed on the Tehran Stock Exchange and Iran Fara Bourse. A data-driven and innovative methodology was adopted to assess the level of utilization and importance of management accounting tools, based on weighted frequency counts of terms and the application of word embedding models and text-to-vector transformations within financial reports. This method relies on an “ideal model of contextually fitted management accounting practices and instruments,” adapted according to firms’ life cycle stages and based on the management accounting dictionary provided by Chiu et al. (2022). Due to the absence of a comprehensive Persian-language dictionary of management accounting, the original dictionary was translated and localized to extract conceptual content from financial texts and measure the degree of attention to various tools. A total of 283 firms were selected as the research sample, and the data were analyzed using a panel data-based multivariate regression model to explore the relationship between the importance of management accounting instruments and corporate financial performance, particularly through profitability indicators.
Results
The results indicate that both MAPI and Fit have a positive and statistically significant impact on firm performance indicators. Specifically, MAPI positively influences return on assets (ROA) and return on equity (ROE) at confidence levels of 99% and 90%, respectively, while Fit exhibits significant effects at 99% and 95% confidence levels. Comparative analysis of the two constructs reveals that Fit has a more pronounced effect on ROE, suggesting that mere adoption or emphasis on tools is insufficient—alignment with environmental and organizational contingencies is essential for enhancing shareholder returns. Moreover, the highest levels of Fit were observed in the energy and petrochemical industries, likely due to the complexity of operations, capital-intensive technologies, and the project-based nature of activities in these sectors. In such industries, operational and financial decisions are typically long-term and resource-heavy, where misallocations can have substantial financial consequences. Therefore, the high Fit index may reflect the institutionalization of contingency-based approaches in management accounting system design. A temporal analysis also revealed a gradual increase in both MAPI and Fit scores over time, indicating improved adoption and alignment of tools.
Conclusion
The findings demonstrate that contextually aligned utilization of management accounting practices has a significant and positive effect on firm profitability and overall performance. These results align with prior literature emphasizing the importance of such tools in improving organizational efficiency and financial returns. Additionally, by introducing a framework for content analysis of financial reports and matching tools to organizational context, strategy, leadership style, and life cycle stages, this study enriches the literature on management accounting and contingency theory, while offering practical strategies for performance improvement. Furthermore, comparing MAPI and Fit suggests that management accounting primarily serves as a driver of operational efficiency, as reflected in its stronger impact on ROA. Its effect on ROE appears less robust, given that ROE is also influenced by capital structure and financing policies. Therefore, while attention to tools is a necessary condition, maximizing shareholder value requires that these tools be contextually tailored to fit the firm’s specific contingencies and organizational environment.

Keywords

Main Subjects

References

 
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Accounting and Auditing Review
Volume 33, Issue 2
2026
Pages 304-338

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