In current competitive environment, the business world pursues approaches that enhance organizational performance highly. Viewed as the art/science of developing, implementing and assessing cross-functional decisions within organizations at minimal costs, strategic management accounting is a critical aspect. The primary motivation for adopting strategic management accounting is to acquire a competitive edge within an industry. Thus, the management approach is geared towards the attainment of organizational objectives.

It is pointed that one of the primary motives of adopting strategic management accounting is to give companies strength necessary to keep an organization ahead of other competitors within a given sector. Rothaermel (2012) observed that the approach management allows organizations to outperform their competitors in financial terms. In current case, the application of strategic management accounting practices is expected to influence the financial performance of corporate entities. However, costs associated with the management approach might undermine the attainment of overall goals. From the above, the relationship between strategic management and corporate performance remains contested.


The methods and techniques of traditional management and cost accounting encountered criticism because of focusing on the provision of information necessary for management in controlling and evaluating performance but neglected many important aspects and their effects within the strategic range. Hence, there is a need for researchers in the field of management accounting to study the strategic direction management accounting is taking.

The business environment is more hostile than it was previously. Now, organizations operate amidst global competition, rapid, technological changes, short product life cycles, increasing customer demands among others (Danneels, 2002). The implication is that managers need new methods to address such new developments if they want to stay ahead of competition or remain in business. It is also apparent that firms need to take any form of advantage that they manage to meet. According to Pearce and Robinson (2000), the formulation and implementation of strategic management accounting systems are among the initiatives that businesses take in gaining competitive advantage.

In the face of the challenges facing the organizational field, the trend has witnessed an increase in the number of organizations adopting management accounting tools to enhance their resilience. At the same time, many techniques and methods have risen in the field of strategic cost accounting and management accounting which facilitate a higher degree of effective and efficient control.

Many authors have examined the relationship between strategic management and corporate financial performance. For instance, Al-Khadash and Feridun (2006) indicated that strategic initiatives were linked to an improvement in financial performance of companies. In particular, the introduction of Activity-Based Costing System (ABC) is critical in tracing overhead costs. Thus, organizations having such initiatives are able to account for product-level and batch costs. It is also observed that ABC systems are useful in all types of process improvement.

Another study investigated strategic management accounting (SMA) within the context of multinational corporations with the aim of understanding SMA processes within varied environments (Tillmann, 2003). After conducting a comprehensive study, Hatif and Sadik (2012) concluded that adopting SMA was necessary, since the framework allowed for gaining of a competitive edge amidst a high level of complexity within the business environment. The author also indicated that in order to attain organizational goals, the adoption of SMA was crucial.

Problem Statement

A number of studies including one by Langfield-Smith (2008) have been performed on implementing management accounting strategies. SMA systems are widely proposed as useful methods in overcoming problems arising from traditional management accounting systems in reference to strategic matters. Many academics argue that the new techniques influence management processes, such as controlling, directing, planning and decision-making, which lead to increased value through the improvement of the deployment of organizational resources.

Initially, research of accounting has assessed the association between the use of accounting and given attributes of firms’ performance (Mahama, 2006). Despite such attempts, few empirical studies have investigated the relationship within the Jordanian Industrial Companies context. Besides, from the introduction it became apparent that the business environment is dynamic to the extent that previous knowledge on the topic might not capture the present status of affairs. Regarding this, conducting a study to find the relationship between Strategic Management Accounting Practices and Corporate Financial Performance within the Jordanian context is necessary.

Research Questions

The proposed study will address the following questions:

  • What are the levels of adoption of Strategic Management Accounting Practices among Jordanian industrial companies?
  • What is the relationship between strategic management accounting practices and internal corporate financial performance? 
  • What is the relationship between strategic management accounting practices and external corporate financial performance? 
  • What is the relationship between strategic management accounting practices and corporate financial performance? 


In satisfying the primary objective of the proposed study, which is to establish whether a relationship exists between SMA and corporate performance, the study will address the following specific aims. To establish the levels of SMA adoption among Jordanian Industrial Companies Listed in Amman Stock Exchange. Thirdly, the study will assess how the implementation of SMA influences financial performance based on ROA, ROS, EPS and DPS. 

It is noted that studying the level of the SMA practices adoption will provide the study with information about the state of firms in regard to the changing of traditional ways of strategy formulation to the modern ones. It will also be the basis of assessing the relationship between the practices and organizational financial performance.

Justifications of the Study

Strategic management accounting is a major area in the running of organizations. Since entities exist to pursue specific objectives, understanding how different strategic approaches influence performance remains an important activity. The proposed study seeks to establish a connection between SMA and performance. Due to such endeavor, it is held that conducting a study of the nature is necessary in illuminating the topic.

Based on the literature review, studies on the topic have yielded mixed results. The implication is that despite a number of researches assessing the issue much information still remains to discover. Hence, carrying out a research to contribute to such academic debates is timely. It is also observed that the field of strategic management is dynamic. Similarly, the business world keeps changing constantly. Consequently, past knowledge on the topic of SMA might not be reflective of the current organizational state. Based on the finding, conducting a study to inform the scholarship, as well as the business community about the environment would be timely.


Hypotheses are critical in empirical studies. In current case, the primary goal is to understand the association between SMA and firm performance. In this regard, the main hypothesis will be: null hypothesis is that SMA implementation has no relationship with corporate performance. The alternative hypothesis, in this case, is that there is a relationship between SMA implementation and corporate performance. Other hypotheses include:

  • First hypothesis: SMA implementation has a positive association with ROA.
  • Second hypothesis: SMA implementation has a positive association with ROS.
  • Third hypothesis: SMA implementation has a positive association with EPS.
  • Fourth hypothesis: SMA implementation has a positive association with DPS.

Since the above hypotheses are formulated in a positive manner, if they are not accepted, the statements are deemed not to be supportive of the idea that the adoption of SMA relates to firm performance.

Literature Review

According to Chongruksut (2002), adopting ABC systems in different sectors within the Thailand economy coincided with the financial crisis and economic recession of 1995. However, Brown and Pierce (2004) discovered that technological reasons, such as the need for cost structuring and product customization did not play a major role in the decisions by corporations to embrace ABC systems. Moreover, the authors found that environmental factors, such as competition had an insignificant effect on the firms’ choices to implement ABC strategies.

Ahmadzadeh, Etemadi and Pifeh (2011) carried out a study using the survey approach in assessing Iranian companies regarding their application of SMA strategies. In particular, the researchers focused on how factors, such as organizational size, type of industry, cost structure, the significance of the cost of information and diversity in products and services influenced the adoption of SMA strategies. Based on the study outcome, there was a positive association between ABC and the various aspects of performance (cost structure, the value of products and services). However, the study found a negative relationship between the adoption of the ABC approach and industry type, organizational size, as well as diversity in products and services.

Based on the above review, it emerges that the researchers drew a distinction between catalytic and regulatory factors. For a factor to be considered catalytic, it must relate to change directly, such as competitors within the industry using the method. On the other hand, the factors are regulatory if the adoption of the systems is based on advice from headquarters of an entity. 

Although adopting the SMA strategies is widely expected to yield positive results, such outcomes are not always guaranteed. A number of researchers such as Brown and Pierce (2004) indicated that in spite of the obvious benefits attributable to the SMA approaches when weighed against the traditional approaches, adopting the new methods is sometimes unproductive. After carrying out a survey within various sectors of the Irish economy, the scholars classified the factors behind non-adoption of the SMA approaches. In their initial section, inhibitive reasons in the implementation of the methods are presented. In this category, absence of adequate support experience, human resource deficiencies, inadequacy of resources and training on software usage and other complexities were found to be impediments to the adoption of the SMA strategies. Under the second category, Brown and Pierce (2004) established the explanations for declining the new approaches. Among the reasons were: no difference in results from the adoption of SMA, difficulties in determining the critical cost drivers, as well as the indeterminate benefits. In the final category, the researchers captured the reasons for not considering the adoption of the ABC system. Based on their findings, satisfaction derived from the traditional system, inadequacy of knowledge and experience on the new approach, simplicity of organizational activities and smallness of organizations and perceived irrelevance of the new methods were major explanations for not showing interest in the ABC approach to management.

Adopting cost-leadership strategies led to better performance among finance-based businesses (Powers and Hahn (2004) as cited by Afande (2013). In his conclusion, Afande indicated that the adoption of cost reduction measures was helpful in strengthening the competitive position of organizations.

In concluding the literature, it is investigated that the results are mixed. Whereas Chongruksut (2002) argues that the adoption of the ABC systems is in response to the external changes, such as economic changes, Brown and Pierce (2004) cite technological reasons, such as cost structuring and product customization as major factors. Pierce and Brown also found that environmental factors had a negative relationship with adopting the SMA approaches. Ahmadzadeh, Etemadi and Pifeh (2011) found a positive relationship between ABC strategies and cost structure, as well as the value of products and services. However, they found negative correlation between the strategies and industry type, organizational size and diversity of products and services. Carrying out a research would contribute towards illuminating the variations that exist.

Research Methodology

The proposed study will draw its sample from industrial companies in Jordan. Only firms listed in Amman Stock Exchange will be considered for selection. Hence, the population for the research is the Industrial Jordanian Companies acknowledged within the country’s Stock Exchange market. However, companies facing concerns, such as liquidation or have not traded shares will not form a part of the population.

The selection of the Industrial Sector is based on the idea that it is big within the country. Given that SMA strategies are applied to increase competitiveness, it is expected that only big firms have the potential to implement such approaches. The intention was done to make calls to listed companies to know those which have adopted SMA practices before selecting thirty of them for the study.

The survey will target financial managers of the selected organizations. The subjects will be expected to respond to specific prompts and questions regarding the extent to which they agree or disagree with certain aspects relating to SMA implementation. The survey will be later handed to the respondents before making telephone calls to check the progress being made.

In measuring the internal performance of the selected companies, indicators such as the ROA and ROS will be applied. On the other hand, EPS and DPS will be used to gauge external performance. The measurement will take a historical dimension since past data are to be used. 

The tool to collect data will be a questionnaire. As a survey instrument, the questionnaire will be developed based on the various SMA strategies (ABC, Just in Time (JIT) and Total Quality Management (TQM). Whereas data on SMA will be derived from the responses of managers, data on performance will be taken from company records. Through peer review, the statements/prompts will be tested and proved appropriate for the study. Regarding data analysis and hypothesis testing, it is proposed to use the descriptive statistical approach including, but not limited to, the mean, standard deviation and simple regression. The mean is useful in understanding how close units are centered around the average value, while the standard deviation demonstrates how far values are dispersed away from the average. On the other hand, regression analyses are critical in showing relationships between variables. In conducting the hypothesis testing, the use of T-test is proposed.


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