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EFFECT OF MANAGEMENT ACCOUNTING INFORMATION ON DECISION MAKING OF MANUFACTURING COMPANIES IN NIGERIA: A CASE STUDY OF PEACOCK PAINT LIMITED, NIGERIA



CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Every economic agent needs reliable information for its success, survival and to relevant in this complex and ever dynamic business world (Amold & Lange, 2003; Benston, 2007; Barrlow, Goldery & Kim, 2003; Agha, 2014). Information is an ingredient that guides managers to action of the organization and this information is provided by accounting information system (AIS) via, the knowledgeable workers. Indeed, Accounting Information System (AIS) is seen as the live wire and blood line of any economic agent as it synergizes the performance of an organization in a view to maximize the wealth of the stakeholders. Accounting is fundamentally a measurement and communication process used to report on the activity of profit and non-profit seeking organizations. In other words, it is concerned with the discipline of summarizing, recording, analyzing and interpreting economic events and other financial activities. This process is performed by accountants who furnish management with the relevant information needed for effective and efficient decision making as to contribute to the quest for means of surmounting industrial, commercial, governmental and academic problems inherent in a dynamic and volatile socio-economic and political setting. Like Axson (2010) states “information is the lifeblood of the modern corporation. Without it, decisions cannot be made, customers cannot be served, and earnings cannot be grown.” Whilst all information is valuable, it ironically alone doesn’t have all the answers and the rapid flow of data may even result in organizations losing control over the quality of information. This was reflected in the research, conducted by Harvard Business Re-view Analytics Services (2014), to understand the level of confidence corporate leaders have in the decisions made. That shows there is a lack of confidence in, how the information is influencing decision-making, as based on the data and information available to them, 42% of the global business leaders don’t have confidence in any decisions made, due to a lack of information or easy access to it. (HBR, 2014). Yet good planning and control over operations via effective decisions needs to be based on a steady flow of good quality and up-to-date information. That means one of the prime challenges facing modern businesses is obtaining quality information from the vast pool of data available to take on business decisions. Because, information quality is considered one of the key determinants for the quality of an organisation’s decisions and actions (Stvilia, et al., 2007). Since, it is perceived that high-quality information makes it easier to convert available information into knowledge, by helping to interpret and assess the information, combine with prior knowledge, and facilitate the utilization of information in new contexts in the organizations (Eppler& Wittig, 2000). Thus, making the acquisition of quality information the key to attaining a competitive advantage (Salaun& Flores, 2001). However, before information can be an asset for business it needs to be managed properly and put into context to determine, what is useful, and what is not. Although, it is widely admitted that information plays a critical role in the success of or-ganizations, information acquired by decision makers will have little impact on ultimate performance of an organization, if it is not really used effectively in the process of decision-making (Davenport & Beers, 1995). In decision-making, the contribution of information reduces uncertainty, allows organizations to quickly respond to business events, and supports companies making changes in business strategies, plans and performance indicators (Popovič&Habjan, 2012). The crucial value of relevant information, especially, in strategic decision-making is illustrated in Citroen’s (2011) study findings, which state that having more relevant information at hand reduces uncertainty, adding to the comfort factor and feeling that the ultimate decision has been supported by a more rational process. This means information has become indispensable for decision-making in any business organization, regardless of the activities pursued and whether the activities are profit-seeking or non-profit. It has become a much needed asset, as the success of an organization is going to be directly proportional to the knowledge it is able to apply in real time to manage the business processes. Accounting, considered to be a key source of information about business performance, can help managers to develop knowledge about the organization’s environment in several ways. It makes visible those events that are not perceptible by daily activities of a manager and provides an overall quantitative perspective on their work. (Hall, 2010) Consequently, accounting information can reveal issues that are overlooked during ordinary daily activities and can provide an independent control over operations to help man-agers be aware, which allows the manager to determine the meaning and significance of all the operations (Socea, 2012).


1.2 Statement of the Problem

Management who takes wrong decision always end up not achieving their set goals and objectives. Many managers who think that they can operate successfully without the use of information provided by their accountants, leads to economic failure such as liquidation of many banks. So, effective decision or management decision cannot be taken by managers if the information provided by their accountants is not properly adhered to. Although, most studies on accounting information system and performance measures in Nigeria has been focused on advanced countries of the world (Armstrong & Baron, 1998; Barthick&Clark, 1999 Bouwew&Abeneth, 2000; Chong, 2001; Chenhall, 2003; Flamhottz,Kanman&Bullen 2004). Suffice it to say that perceived accounting information and performance research literature in corporate reporting is scanty, thus (Defound& Zhang, 2011) it has not been comprehensively researched primarily because of problems with data availability. In Nigeria, fairly related literature is an accounting system (Chenhall, 2003; Flanhottz, Kanman& Bullen, 2004). The aforementioned studies, provides no significant validity of existing empirical evidence of AIS in emerging economics like Nigeria. The investigators are not aware of any elaborate and expansive study on the influence of AIS on management decision making. For the identified extant research works conducted in this area, none to the best of the researcher’s knowledge has deemed it fit to account for the empirical evidence of the accounting information system on management decision making of manufacturing companies in Nigeria.


Objective of the Study

The broad objective of this study is to investigate the effect of management accounting information on decision making of peacock paint limited, Nigeria. However, the specific objectives of the study will be: Ascertain the extent to which the use of accounting software affects decision making of peacock paints, Nigeria. Determine the effect of information communication infrastructure on effective decision making of peacock paints, Nigeria. Identify the effect accounting data on effective decision making of peacock paints, Nigeria.


1.4 Research Questions

The research questions for this study are:

What is the extent to which the use of accounting software affects decision making of peacock paints, Nigeria?

What is the effect of information communication infrastructure on effective decision making of peacock paints, Nigeria?

What is the effect accounting data on effective decision making of peacock paints, Nigeria?


Statement of Hypotheses

The following null hypotheses (H0) have been developed to guide this study;

Ho1: Accounting Software does not significantly affect decision making of peacock paints, Nigeria. Ho2: Information communication infrastructure has no significant effect on decision making of peacock paints, Nigeria.

Ho3: Accounting data has no significant effect on decision making of peacock paints, Nigeria


1.6 Significance of the Study

The study is aimed at establishing whether there is an effect of management accounting information on decision making of manufacturing firms in Nigeria, Specifically, management of Peacock Paints Nigeria. Therefore, the study will be of significance to the organization, managers, and future researchers The management of peacock paint will use the research where applicable as a tool for formulating policies for the firm as a standard of evaluating accounting information and control of their accounts department through financial decision. The work will also go a long way to educate managers on the relevance of a sound accounting information in decision-making process of their organisation and subsequently on its overall growth. The work will serve as a source of secondary data to future researchers who intend to carry out further research work on “accounting information as a tool for management decision making” or any related topic. It will also help students in the accounting department to have in-depth knowledge of the practical application of accounting information. The research will enable the general public imbibe thorough knowledge of the uses of accounting information as a tool for management decision making. It will also give foresight on the applicability of accounting information on the Management of manufacturing firms.


1.7 Scope and Limitation of Study

The study is aimed at establishing whether there is an effect of management accounting information on decision making of manufacturing firms in Nigeria. Suffice to say therefore that the interest area of the researcher is on the staffs of peacock paints as at 2018. The main limitation of the study include some vital as well as important information which the staffs refused to disclose for security reasons, Incomplete and lack of availability of records, which was considered to be very useful, were referred to as confidential. However, time and financial constraints are the most impactful limitation to the study. Finally, despite all limitations and constraints, the research contained the necessary relevant resource material and to- date data obtained, analyzed and provided in the work. Operational Definition of Terms Accounting This is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information. Information This is a complete set of processed data that has a meaning. Accounting information These are processed data used by an organization to make financial decision. Financial Accounting It is the process of collecting, classifying, recording, summarizing and communicating data in respect of event, which can be expressed in terms of money for the purpose of making decisions. Accountant This is a professional whose job is to prepare and keep the books of account of an organization. Management Accounting This is a process of allocating resources by planning, organizing, controlling and directing for the purpose of producing desired output. Management This means a group of decision makers or managers in an organization who see to the smooth running of the affairs of the business. Assets These are the economic resources of the business that can usefully be expressed in monetary terms. Assets may be in form of land, building and equipment which have readily identifiable physical features. Liabilities These are the debts or obligations of the company in which the company must pay in money or services at some time in future. They therefore, represent creditors’ claims on the firm’s assets Balance sheet This is a financial statement that shows the financial position of a firm at a specific date, usually at the close of the last day in the month of an accounting period. It represents the listing of a firm’s assets, liabilities and owner’s equity on a given date.


EFFECT OF MANAGEMENT ACCOUNTING INFORMATION ON DECISION MAKING OF MANUFACTURING COMPANIES IN NIGERIA: A CASE STUDY OF PEACOCK PAINT LIMITED, NIGERIA


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All Project Materials Inc. (2020). EFFECT OF MANAGEMENT ACCOUNTING INFORMATION ON DECISION MAKING OF MANUFACTURING COMPANIES IN NIGERIA: A CASE STUDY OF PEACOCK PAINT LIMITED, NIGERIA. Available at: https://allprojectmaterials.com/department/paper-7417.html. [Accessed: ].

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