Responsibility Accounting and Corporate Performance of Quoted Industrial Goods Firms in Nigeria
CHAPTER ONE
Objective of the study
The main objective of this study was to examine the effect of responsibility accounting practices on corporate investment decisions among selected Quoted Industrial Goods Firms in Nigeria. The specific objectives were to:
- evaluate the effect of organizational structure on corporate investment decisions in selected Quoted Industrial Goods Firms in Nigeria;
- examine the effect of managers responsibility powers on corporate investment decisions in selected Quoted Industrial Goods Firms in Nigeria;
- investigate the impact of budgetary control system on corporate investment decisions in selected Quoted Industrial Goods Firms in Nigeria;
- ascertain how performance report affect corporate investment decisions in selected Quoted Industrial Goods Firms in Nigeria;
- establish how reward system affect investment decisions among selected Quoted Industrial Goods Firms in Nigeria and
- evaluate the effects of responsibility accounting system on corporate investment decision among selected Quoted Industrial Goods Firms in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
Responsibility accounting and productivity
Kajola, Adedeji and Olawale(2003) defined responsibility accounting as a system of accounting that segregate revenues and costs into areas of personal responsibility ,in order to assess performance attained by persons to whom authority has been assigned. Mojgan (2012) explained that responsibility accounting that reports managers’ areas of responsibility relating to cost, and revenue. Pandey (2002) gave the following principles underlying responsibility accounting: a clear definition of responsibility centre within an environment of business, where for each centre, the extent of the responsibility is made known. The controllable and non-controllable financial activities are specified, with specified accounting system to accrue information for the responsibility centre. Performance reports are therefore prepared for the intending users. Adeniji (2012), Kajola et al(2003) and Nedles, Powers and Crosson (2002) identified three centres for responsibility evaluation: cost centre is a responsibility centre where the manager is assessed for the controllable costs under his/her signing authority; profit centre where the manager effective is assessed for both cost and revenue in their monetary terms; investment centre is a responsibility centre where that manager is assessed for profit generation, the financing of the business and cost. Here measures like return on investment, residual income, and economic added valued are used for the performance evaluation; and revenue centre where the manager is accountable primarily for revenue, and whose success is based on revenue against the budgeted figures.
The concept of productivity is very important in the evaluation of quoted companies; as the results of the evaluation will have the market value of the firm, the shareholders expectation on wealth maximization.
Mojgan (2012) in study viewed performance management is to evaluate the economic planning and outcome of various responsibilities to include return on investment(ROI),residual income (RI),return on sales( ROS),economic value added (EVA),market value added (MVA). He explained that EVA is the profit of the business unit after deducting tax charge and cost of capital. The EVA focuses on shareholders because by deducting and deducting expected return, EVA reflects economic profitability, which make behave that they are owners of the firm. He asserted further that market value added (MVA) measures the external performance by comparing the average market value of shareholders’ equity with the book and value of the equity.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
In this chapter, we would describe how the study was carried out.
Research design
It is a term used to describe a number of decisions which need to be taken regarding the collection of data before they are collected. (Nwana, 1981). It provides guidelines which direct the researcher towards solving the research problem and may vary depending on the nature of the problem being studied. According to Okaja ( 2003, p. 2),” research design means the structuring of investigation aimed at identifying variables and their relationship, it is used for the purpose of obtaining data to enable the investigator test hypothesis or answer research question by providing procedural outline for conducting research”. It is therefore, an outline or scheme that serves as a useful guide to the researcher in his efforts to generate data for his study. The study adopted survey research design to gather data. Survey method was adopted to collect primary data from the respondents.
Research settings
This study was carried out in Lagos state.
Sources of Data
The data for this study were generated from two main sources; Primary sources and secondary sources. The primary sources include questionnaire, interviews and observation. The secondary sources include journals, bulletins, textbooks and the internet.
CHAPTER FOUR
RESULTS AND DISCUSSION OF FINDINGS
Interpretation
The results indicate that in general, organizational structure was perceived to be the most crucial variable in responsibility accounting system with a mean of 4.13 on a point of 5. Each of the managers’ responsibility power and budgetary control system also gave similar value. The mean values were 4.08 for both manager’s responsibility power and budgetary control system respectively. Performance report and reward system had a marginally lower mean value of 4.05 and 4.04 respectively. On the average, the respondents generally and strongly agreed with the views that organization structure, managers’ responsibility power, budgetary control system performance report and reward system are key components of responsibility accounting system among selected Quoted Industrial Goods Firms in Nigeria.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
The study examined the effect of responsibility accounting on corporate performance in Quoted Industrial Goods Firms in Nigeria. The findings from the study provide relevant empirical evidence by showing that organizational structure, managers responsibility powers, budgetary control system, performance report and reward system have significant effects on corporate investment decisions. The implications of the effect of responsibility accounting adoption on corporate investment decisions were given statistical and empirical fundamentals considered useful for policy and strategy formulations. Therefore, the study concluded that:
- Organizational structure has strong, significant and positive effect on corporate investment decisions in Quoted Industrial Goods Firms in Nigeria;
- Managers responsibility powers has weak, but positive significant effect on corporate investment decision in listed manufacturing firms in Nigeria;
- Budgetary control system has a strong, positive and significant influence on corporate investment decisions among Quoted Industrial Goods Firms in Nigeria.
- Performance reports exert strong, positive and significant effect on corporate investment decisions among Quoted Industrial Goods Firms in Nigeria.
- Reward system has strong, positive and significant influence on corporate investment decisions in Nigeria’s listed manufacturing firms.
- The study recommended that corporate and institutional investors and other decisions makers alike should consider and monitor the organizational structure, manager’s responsibility power, budgetary control system, performance report and the company’s reward systems in addition to the audited financial statement when embarking on corporate investment decisions.
Implication of Findings
The findings of this study have implications to investors, employees, government agencies, customers, lenders and creditors, regulators and researchers. The study has revealed that quantitative measurement used in this study have informed that responsibility accounting adoption has significant effect on corporate investment decisions in Quoted Industrial Goods Firms in Nigeria. The findings informed the policy measures that can be taken by management and regulators in pushing manufacturing companies providing quality based information for the purpose of effective investment decision making.
Shareholders and prospective investors are provided with the information from this study, that responsibility accounting reporting are that responsibility accounting reporting are imperative for their decision making in terms of additional investment or new investment and the contribution of their businesses to different stakeholders. Employees are provided with information that responsibility accounting is strategic to their decision making in terms of their employment, carrier advancement and its sustainability.
The regulators, especially the Nigeria Stock Exchange is provided with information about responsibility accounting reporting from selected listed manufacturing companies and their contribution to governmental value creation in terms of taxes and other levies that allow federal and state government in Nigeria to get financial capacity to support its social and economic development. NSE is provided with the findings that would assist in deepening the capital market operations through appropriate investment decisions. Thus, the findings would help in closing the information asymmetric gap between the shareholders (principal) and the management (agent) this study would therefore, move the capital market operations towards the path of perfection through the dissemination of quality information to stock market operators.
The study revealed to management of listed companies the effect of individual component of responsibility accounting on investment decisions. The importance of such concept as the organizational structure, manager’s responsibility power, budgetary control system, performance report and reward system together with their effect on investment decision are broadly highlighted. Additionally, the study empirically observed that variable such as the organizational structure, budgetary control system, and performance report are more significant in influencing corporate investment decisions unlike the manager’s responsibility power and reward system.
To the researchers, the study provides additional literature in the field of responsibility accounting and investment decision. This work is arguably the first to examine the applicability of adopting responsibility accounting concept in corporate investment decision among the Quoted Industrial Goods Firms in Nigeria.
To policy formulators, this study provides an insight to all the stakeholders about the need for management to always present responsibility accounting report apart from the conventional financial accounting report. This position is premised on the fact that, responsibility accounting report is more far-reaching in terms of the information content. Additionally, such report will facilitate effective planning, control apart performance evaluation apart from the corporate investment decisions.
REFERENCES
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