Nelson Waweru

Management accounting change in South Africa

Most research on management accounting change relates to practices in developed countries. This paper reports on a field study of management accounting change in the South African context. It uses a contingency theory framework within four retail companies to understand the processes of their management accounting systems change and to explore the rationales for such change processes. The findings indicate considerable changes in management accounting systems within the four cases. Such changes include increased use of contemporary management accounting practices notably activity‐based cost allocation systems and the balanced scorecard approach to performance measures. The paper suggests that recent environmental changes in the South African economy arising from government reform/deregulation policy and global competition largely facilitated the management accounting change processes within the participating organisations.

The effects of behavioural factors in investment decision-making: a survey of institutional investors operating at the Nairobi Stock Exchange

This study investigated the role of behavioural finance and investor psychology in investment decision-making at the Nairobi Stock Exchange with special reference to institutional investors. Using a sample of 23 institutional investors, the study established that behavioural factors such as representativeness, overconfidence, anchoring, gamblers fallacy, availability bias, loss aversion, regret aversion and mental accounting affected the decisions of the institutional investors operating at the NSE. Moreover, these investors made reference to the trading activity of the other institutional investors and often exhibited an institutional-herding behaviour in their investment decision-making.

A survey of management accounting practices in South Africa

This paper reports on a survey of management accounting practices in 52 South African firms. The survey was conducted in 2001 between January and April. The changes that have taken place in the field of management accounting and the factors that may have prompted management accounting change are also documented. Our findings indicate an increased use of most of the management accounting practices advocated in management accounting literature, in the sampled firms. Modern management accounting techniques such as activity based costing and balanced scorecard type performance measures are used together with the traditional management techniques such as budgeting and standard costing. Further, our survey revealed a significant change occurring in management accounting practices in South Africa in recent years. Such a change is mainly attributed to the opening up of the South African economy in the early 1990s.

Determinants of quality corporate governance in Sub-Saharan Africa: Evidence from Kenya and South Africa

Purpose - – This study aims to examine the factors influencing the quality of corporate governance in South Africa (SA) and Kenya. Firm-level variables including performance, firm size, leverage, investment opportunities and audit quality were identified from the corporate governance literature. Design/methodology/approach - – The study used panel data of 247-firm years obtained from the annual reports of the 50 largest companies listed on the Johannesburg Securities Exchange (JSE) of SA and 234-firm years obtained from the 49 companies listed on the Nairobi Stock Exchange (NSE). The author then used content analysis to extract the study variables from the annual reports and multiple regression analysis to determine their relationship. Findings - – The study found audit quality and firm performance as the main factors influencing the quality of corporate governance in Kenya and SA. There are also differences in the quality of corporate governance between the two countries. Research limitations/implications - – First the study sample consists of the 50 largest firms listed in the JSE of SA and another 49 companies listed in the NSE of Kenya. Since these are large companies, the results may not be generalized to other smaller firms operating in both SA and Kenya. Second, this study is constrained to SA and Kenya. Firms in other developing countries may differ from their SA and Kenyan counterparts. Originality/value - – The results of this study are important to the King Committee and other corporate governance regulators in Sub-Saharan Africa, in their effort to improve corporate governance practices, minimize corporate failure and protect the well-being of the minority shareholders. Furthermore, the study contributes to the understanding of the variables affecting the quality of corporate governance in developing economies of Africa.

The use of performance measures: case studies from the microfinance sector in Kenya

Purpose - The intent of microfinance institutes (MFIs) in developing countries is to provide loans to very poor people in order to help them transform their lives. MFIs tend to receive subsidies; sustainability is being sought to free MFIs from non-market dependencies. Sustainability is expected to be achieved with “best practices,” of which management with performance measures is a component. The purpose of this paper is to examine the use of performance measures by three Kenyan MFIs, which are classified as formal and client based, and likely to use rational and explicit performance measures. Clients in these MFIs are placed into self-help groups with two responsibilities: to provide mutual support and advice to the borrowing client; and to provide the MFI with a guarantee that loans of group members will be repaid. Design/methodology/approach - Based on a review of the economics and performance measurement systems literatures, research questions were developed along with an interview guide. Case studies were used to administer an interview guide which was distributed to the respondents prior to the face-to-face interviews. Findings - The study concludes that MFIs have relatively well-developed performance measures that support their particular businesses. There was a good balance between the use of financial and non-financial performance measures. However, output measures were more commonly used than process measures. The nature of the MFIs suggests the importance of performance measurement. The managers of the MFIs are concerned with performance measurement, as expected within a bureaucracy, and a top-down demand is present. In addition, group members or clients are interested in performance measurement as each member guarantees the loans of all fellow group members who have loans with the MFI. Thus, the customers exert a bottom-up demand for performance measurement. Originality/value - The findings support the view that performance measures are a means for managing MFIs and are a likely requirement for sustainability. Furthermore, the findings have identified performance measures (similar to those at banks) that are appropriate for the three MFIs in Kenya. The findings are important since the identified performance measures may be adopted by other evolving MFIs in this relatively new sector. In addition, the findings contribute to a better understanding of the genesis of the less popular results and determinants performance measurement framework of Fitzgerald

Predictors of management accounting change in South Africa: Evidence from five retail companies

There is limited knowledge of management accounting practices and change in developing countries. This paper explores the processes of management accounting change in five South African retail companies by means of case studies. A number of factors have been identified from the contingency theory literature, which are applied in five cases to examine the management accounting changes and the reasons for them. The cases indicate considerable changes in the organisations’ management accounting practices during the last ten years. Recent environmental change in South Africa arising from government reform/deregulation policy and global competitive environments largely contributed to the management accounting change processes, which is consistent with contingency theory. This paper provides empirical evidence on which future research in less developed countries can be conducted.

Corporate governance guidelines compliance and firm financial performance: Kenya listed companies

Purpose - This paper aims to examine the impact of compliance with corporate governance (CG) guidelines during the period 2002-2014 on firm financial performance and firm value of Kenyan-listed companies. Design/methodology/approach - Using panel data of 520-firm year’s observations between 2005 and 2014, the authors test the hypothesis that compliance with CG guidelines issued in 2002 by Capital Markets Authority (CMA) improved firm financial performance and firm value. Findings - Compliance with CG Index which is an aggregate of all the CG guidelines is positively and significantly related to firm performance and firm value. Board evaluation is also positively and significantly related to firm performance. The findings suggest that CG guidelines are associated with firm financial performance and firm value. Originality/value - The authors provide evidence on the relationship between CG practices and firm financial performance and firm value in Kenya. Second, the authors provide evidence on board evaluation which has not been tested before in a “comply or explain” environment. Finally, they evaluate how CMA 2002 CG guidelines steered firm financial performance and firm value over its life cycle from 2002 to 2014. These results are important to CMA and other CG regulators and boards in their efforts to improve CG practices in the region.

The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed on the Nairobi Stock Exchange

This study assesses the level of implementation of Enterprise Risk Management (ERM) in companies listed in the Nairobi Stock Exchange (NSE). The study also seeks to test the significance of factors affecting this level of ERM implementation and to investigate whether the level of ERM implementation has a positive effect to the value of companies as measured by Tobin’s Q. Data was collected from a sample of 22 companies listed on the NSE for the periods ended December 2009. The research findings show that most of the organizations sampled viewed ERM implementation as a strategic business initiative as compared to a compliance requirement. The study also finds that there is a significant relationship between the appointment of a Chief Risk Officer and the level of Enterprise Risk Management Implementation in companies. However, it does not find a significant relationship between the level of ERM implementation and the following variables; industry of operation, level of board independence, size of the firm, and growth rate of the firm. Consistent with prior research, this study also found a significant relationship between a company’s level or Enterprise Risk Management implementation and the company’s value. The results of this study show that an increase in the level of ERM implementation in companies had a positive contribution to the value of the companies.

Behavioural factors influencing investment decisions in the Kenyan property market

This study investigates the perceptions of estate agents regarding the decision making behaviour of property investors in Kenya using behavioural finance theories. The study uses a survey questionnaire to collect data targeting all the 155 real estate agents within the Nairobi district who are listed in the Kenya Postal Directory 2010 Nairobi edition. The study establishes that anchoring and representativeness are the major behavioural factors that influence property investment decision making. In addition to the behavioural factors, the price and location of the property are also considered important factors when making property investment decisions. Furthermore, the results indicate that property price changes and property market information have a very high impact on property investment decisions. Most investors search for property information through previous experience and through real estate firms.

The Appropriateness of Performance Measurement Systems in the Services Sector: Case Studies from the Micro Finance Sector in Kenya

The intent of micro finance in developing countries has been to provide loans to very poor people and to help them transform their lives. This study examined micro finance institutes (MFIs) in Kenya. Of the various MFIs in Kenya, it examined three characterized as formal and client based and likely to use rational and explicit performance measures. Clients in these MFIs have been placed into self-help groups with two responsibilities: (1) provide mutual support and advice to the borrowing client, and (2) provide the MFI with a guarantee that loans of group members will be repaid. Based on a review of the performance measurement systems (PMS) literature, research questions were developed along with an interview guide. Case studies were used to administer an interview guide which was distributed prior to the face-to-face interviews. The study concludes that MFIs have relatively well developed PMS that support their particular businesses. The nature of the MFIs suggest the importance of performance measurement. The managers of the MFIs are concerned with performance measurement as expected with a bureaucracy. This is the top down demand for performance measurement. In addition, group members or clients are interested in performance measurement as each guarantees the loans of all group members who have loans with the MFI. Thus, the clients exert a bottom up demand for performance measurement.