Does Consistency in Management Control Systems Design Choices Influence Firm Performance? An Empirical Analysis
Accounting and Business Research, 2014
Posted: 6 Mar 2014
Date Written: March 4, 2014
Abstract
This study examines the impact on firm performance of theoretically-consistent relationships between three management control systems (MCS) design choices — delegation, performance measurement, and incentive compensation. Based upon the ‘three-legged stool’ model and agency theory, it hypothesises that theoretically-consistent MCS design choices are associated with enhanced firm performance. Using survey data from large Australian firms, the findings support the hypothesis, suggesting that an appropriate MCS design is a determinant of firm performance. The study contributes to the literature by moving beyond a focus on the antecedents of the three key MCS design choices to the consequence of alignment of those choices.
Keywords: Delegation; Incentive compensation; Performance measurement; MCS design; Survey
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