ABSTRACT
Managerial decision making requires quality, relevant, reliable and accurate accounting information. Accounting information plays a decision-facilitating role since it possesses value- relevance capabilities to enhance decision making. Through the use of accounting information, managers are enabled to ascertain the meaning and significance of day-to-day activities of an entity. In this regard, the aim of this study is to examine the perceptions of managers on the usefulness of accounting information during decision-making process.
The study employs the qualitative research method. This method aids discovering meanings that people attribute to events they experience. The study investigates the perceptions and views of respondents on the usefulness of accounting information in the decision-making process. In doing so, the study locates meanings that managers confer on the subject matter.
The study finds that managers find accounting information useful in various stages of the decision- making process. The study indicates that usefulness of accounting information in decision making is influenced by the roles of accounting information in financial management, investment decision making, organizational growth, performance evaluation and determination of organizational profitability and position.
The study recommends that participant observation or ethnography should be used by researchers for further studies in order to critically assess how managers engage with accounting information in the decision-making process.
CHAPTER ONE
INTRODUCTION
Introduction
This chapter provides an introduction to the study. It discusses background of the study, scope of the study and problem statement. The chapter also presents the research aim and objectives, research question, methodology and data collection methods, ethical considerations and organization of the study. These sections are discussed in turn hereafter.
Background of the study
Organizational success is ultimately determined by managerial roles including decision making. The essentiality of decision making through a rigorous decision-making process cannot be undermined by managers. As a result, the ability of managers to utilize available information, especially accounting information to aid decision making is important. Primarily, accounting information is to assist managers and owners of businesses with decision-making (Halabi & Carroll, 2015). Hence, the role of accounting information in an organizational context is crucial albeit prior studies have not solely considered the use of accounting information in the decision- making process and its application in wider organizational setting (Hall, 2009). Evidently, accounting information plays a decision-facilitating role in the form of periodic financial reports or analysis of these reports which are sources of accounting information (Sprinkle, 2003; Horngren, et al., 2005). The provision of accounting information and the consideration of its characteristics such as relevance, understandability, reliability, timeliness, accuracy and comparability improve managers knowledge and their ability to make better decisions (Sprinkle, 2003). Managers are faced with a portfolio of organizational problems and need information to
develop knowledge of the business environment. Due to this, information to be used by management must possess value-relevance capable of enhancing decision making (Ragab & Omran, 2006). In Beaver’s (1989) understanding, the main objective of accounting information is to help its users to make informed decisions.
Accounting provides vital information regarding organizational performance. Relatedly, accounting information highlights daily activities while providing detailed checks on performance to assist managers assess organizational performance (Simon, et al., 1954). Managers responsible for project management usually find accounting information about budgeted cost versus actual cost very crucial to determine unprofitable projects (Van der Veeken & Wouters, 2002). According to McKinnon & Bruns (1992), accounting information can also be used by managers to ascertain the meaning and significance of day-to-day management activities. Drawing on Biddle & Hilary’s (2006) study, provision of quality accounting information reduces information assymetry between managers and providers of capital. Accounting information also plays the role of enhancing internal decision-making efficiency. In this regard, the role of accounting information extends beyond its utilization by managers to make decisions to monitoring of the effectiveness of the decisions made. In essence, accounting information enables organizational transparency thereby enhancing monitoring of opportunistic behavior of management while encouraging decision making (Zhai & Wang, 2016).
Historically, the two major divisions of accounting information namely financial accounting and management accounting information have been given much attention with management accounting information closely associated with management (Jonsson, Relate management accounting research to managerial work!, 1998). Notably, much research in management
accounting has been focused on the use of accounting information in clearly distinguishable decision-making scenarios (Hall, 2009). Besides, historical financial accounting information composed of financial statements such as corporate annual reports and other books of account complement development of management knowledge for strategic decision making. Accounting information can be viewed as a private asset to an organization necessary for decision making. Despite the aforementioned, accounting information may focus on historical financial accounting information (Hassan & Power, 2009). Evidently, accounting data constitutes valuable information for judging the value of an organization (Zhai & Wang, 2016). In a ground-breaking paper, Ohlson (2005) built a model to establish the relationship between accounting information and the value of an organization. Contemporary discussions emphasize the importance of accounting information to management.
Undoubtedly, managers do make decisions. However, empirical investigations aimed at examining what managers actually do indicate that decision-making can be a relatively small part of managerial roles (Whiteley, 1985; Hales, 1986; Mintzberg, 1973; Stewart, 1988). Managerial roles comprise addressing risks and business environment challenges such as uncertainty, market turbulence, and the likelihood for significant errors (Isenberg, 1984; Kotter, 1982; Landau & Stout, 1979). As such, managers’ understanding of these challenges through the availability of relevant information is essential. Existing literature highlight the relevance of accounting disclosures to provide quality information beneficial to managers and other stakeholders. Disclosure of high- quality accounting information optimizes managerial investment decision making, improves resource allocation efficiency and ensures more returns to investors (Bushman & Smith, 2003).
There exists much to be investigated concerning what managers actually use accounting information for since studies have not fully assessed how managers use accounting information in their managerial work. The scanty literature is dominated by relevance of accounting information to multiple stakeholders but this study is designed to fill the gap by examining the perceptions of managers on the usefulness of accounting information during decision making in the Ghanaian context. There is therefore the need to examine how managers engage with accounting information as an input in the decision-making process.
