Che Ruhana Isa

Relationship between information systems sophistication and performance measurement

Purpose – Studies in performance measurement systems (PMS) seem to receive little attention in the information system (IS) literature. The purpose of this paper, therefore, is to contribute to the stream of research in the fields of performance measurement and ISs.Design/methodology/approach – The paper examines how IS sophistication is linked to PMSs by investigating the use of performance measures in the Malaysian financial services industry. Data were collected from 140 financial institutions through self‐administered questionnaire survey of top‐level executives. A component‐based structural equation modelling, partial least squares, was used to test the research model.Findings – The results indicate that IS sophistication is a determinant of performance measures. The results also indicate that different dimensions of IS sophistication affect different dimensions of performance measures usage.Originality/value – The paper significantly extends prior research on performance measures by establishing IS s...

Adoption of advanced manufacturing technology (AMT) and management accounting practices: the case of manufacturing firms in Malaysia

This paper examines advanced manufacturing technology (AMT) adoption in manufacturing firms and its relationship with management accounting practices. Advancements in technology and trade liberalisation have significantly intensified competition in the domestic and the international markets. One of the strategies for manufacturing firms to become agile and responsive to market changes is to adopt AMT, which often results in drastic changes in the production cost structure. Hence, it is conjectured that AMT adoption would lead to adoption of new costing methods, such as activity-based costing (ABC) and a higher emphasis on non-financial performance measurement indicators (PMIs). Results from this study offer mixed support for the predictions on the hypothesised relationship between AMT adoption and certain management accounting practices.

Management accounting systems, enterprise risk management and organizational performance in financial institutions

Purpose - – The purpose of this paper is to examine the linkages between management accounting systems (MAS), enterprise risk management (ERM) and organizational performance by examining MAS information characteristics that match ERM implementation and joint effects of MAS and ERM on organizational performance. Design/methodology/approach - – The research method involved administering a questionnaire to 106 financial institutions (FIs) in Malaysia. The respondents were chief financial officers or staff members holding the most senior positions in the finance department of the institutions. Findings - – The significant findings on the association between ERM and MAS show that implementation of ERM requires the use of sophisticated MAS information. ERM and MAS complement each other as both are integral to decision making, planning and control in an organization. The finding also substantiates the important role of ERM in enhancing non-financial performance. Research limitations/implications - – This study covered only MAS as part of sub-control systems in an organization. Future studies could investigate the link between a more comprehensive management accounting and control system and ERM. Furthermore, this study used perceptual measures of MAS, ERM and organizational performance. Practical implications - – The regulating body should promote best management practices of sophisticated MAS and ERM among FIs as these practices will create competitive advantage as well as help those institutions comply with regulations. Originality/value - – This study has contributed to the body of knowledge on the linkages between MAS, risk management system and organizational performance.

Does competition improve financial stability of the banking sector in ASEAN countries? An empirical analysis

This study examines the influence of competition on the financial stability of the commercial banks of Association of Southeast Asian Nation (ASEAN) over the 1990 to 2014 period. Panzar-Rosse H-statistic, Lerner index and Herfindahl-Hirschman Index (HHI) are used as measures of competition, while Z-score, non-performing loan (NPL) ratio and equity ratio are used as measures of financial stability. Two-step system Generalized Method of Moments (GMM) estimates demonstrate that competition measured by H-statistic is positively related to Z-score and equity ratio, and negatively related to non-performing loan ratio. Conversely, market power measured by Lerner index is negatively related to Z-score and equity ratio and positively related to NPL ratio. These results strongly support the competition-stability view for ASEAN banks. We also capture the non-linear relationship between competition and financial stability by incorporating a quadratic term of competition in our models. The results show that the coefficient of the quadratic term of H-statistic is negative for the Z-score model given a positive coefficient of the linear term in the same model. These results support the non-linear relationship between competition and financial stability of the banking sector. The study contains significant policy implications for improving the financial stability of the commercial banks.

Factors affecting the financing cost of microfinance institutions: panel evidence

Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh’s microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients’ savings and cumulative surplus, have a significant negative effect on the financing cost of MFIs. On the other hand, certain external sources of funds, notably donations and funds from government apex bodies, serve to reduce financing cost, which reinforces the efficiency and effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt.

Valuation of enterprise risk management in the manufacturing industry

The paper examines the valuation of enterprise risk management (ERM) through its effects on firm cost and efficiency. Consistent with the empirical evidence, ERM is found to benefit larger firms by reducing earning variability and providing higher returns on equity. The results suggest significant evidence of a value premium attached to effective ERM programmes. It is found that an effective ERM programme adds value to manufacturing firms by mitigating firm cost and enhancing firm efficiency. The results also suggest that the strong valuation effects of ERM are associated with cost management, inventory management, asset management, and cash flow management in China.

Evidence on the usefulness of management accounting systems in integrated manufacturing environment

Purpose This paper aims to report the results of a study investigating the mediating role of managerial use of management accounting system (MAS) information in the relationship between integrated manufacturing practices (IMPs) and organisational performance (OP). IMP comprises three manufacturing practices, namely, just in time (JIT), total quality management (TQM) and advanced manufacturing technologies (AMTs). Design/methodology/approach Using a mailed questionnaire, the data were gathered from senior managers working in 110 manufacturing firms listed in the Federation of Malaysian Manufacturers (FMM) Directory. Partial least square (PLS) was used to analyse the data. Findings The results reveal that the relationship between IMP and OP exists via managerial use of MAS information, that is, adoption of IMP is positively associated with managerial use of MAS information, which in turn, is positively associated with the performance. In other words, managerial use of MAS information plays a significant role in linking adoption of IMP with OP. Originality/value The use of MAS information in integrated manufacturing environment is found to assist firms in improving performance. Prior research on the IMP–OP relationship reports mixed (inconclusive) results. The authors contend that a possible reason for such results reported in prior studies is that the studies did not investigate the relationship between OP and IMP comprising each of the three manufacturing practices and performance as proposed by Dean and Snell (1991).

Regional Corporate Culture, Motivation and Technology Impacts on Performance of Quality Certified Firms: A Malaysian Perspective

Prior research provides inconclusive evidence of the link between quality certification and firm performance. This research revisits the issue in the context of Malaysia where employers find it difficult to motivate employees due to corporate culture. Tenets of the motivation theory, stakeholder theory and Business/IT alignment form the theoretical basis for this investigation. Contrary to expectations, Malaysian quality certified firms showed high operational performance, attributed primarily to the qualities of aligned IT systems and business processes driven by high internal motivation of IT stakeholders. Business stakeholders had high external motivation focused on exploitation of the ISO logo, which had insignificant impact on operational performance but had significant influence on business performance. Theoretical and practical implications are discussed.