Effect of management accounting practices on the financial performance of commercial banks in Kenya.
Abstract
Management accounting has always been a critical element of the management
function as enhances quality of decision making. The research purpose entailed
explaration of the impact of management accounting practices on the financial
performance of Kenyan licenced and operative commercial banks. The research had
costing system, budgeting, evaluating performance, decision making information and
strategic analysis as independent variables and return on assets as the dependent
variable. The contingency theory was the anchor theory and it highlighted the lack of
uniformity in applying management accounting practices across organizations. The
contingency theory was relevant to the study as it demonstrated the dynamic nature of
MA practices across the commercial banking industry in Kenya. The theory also
proposed specific factors that management teams must consider in deciding the
appropriate management accounting practices suitable for their operations. The study
population of this study consisted of all commercial banks operative in Kenya as of
September 2020. The study used a descriptive and a cross-sectional study design and
relied on primary data. Descriptive statistics and inferential statistics were the mode
of statistics. 38.1% of the variations in ROA, the dependent variable was explained by
MA practices which formed the study’s independent variables. The results also
showed that the standard error of estimate is 0.374 hence showing that there is little
variation and thus the correlation will be almost perfect. Return on assets had a weak
and negative correlation with performance evaluation, strategic analysis and
information for decision making but showed a weak and positive correlation with
costing system and budgeting. The study found out an insignificant positive
relationship between return on assets and costing system whereas there was a minor
positive relationship between ROA and budgeting. The findings also found out that
performance evaluation had a minor negative relationship with ROA. Further the table
shows that information for decision making had a negative relationship with ROA.
The findings further showed that strategic analysis has a negative relationship with
ROA. The study came to a conclusion that costing system and budgeting practices in
banks have a positive effect on ROA among banks in Kenya. However, the research
recommended that bank managements should be wary about these Management
accounting practices fluctuations as it could affect bank ROA. The researcher
recommended that bank managements should have policies on how to reduce these
fluctuations and finally the researcher recommended that more research is done
involving all other management accounting practices and how they affect ROA.
Publisher
UoN
Subject
Effect of management accounting practices on the financial performance of commercial banks in Kenya.Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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