The solutions to enhance the use of management accounting in small and medium enterprises in thai nguyen province

THE SOLUTIONS TO ENHANCE THE USE OF MANAGEMENT
ACCOUNTING IN SMALL AND MEDIUM ENTERPRISES
IN THAI NGUYEN PROVINCE

A DISSERTATION
Presented to
the Faculty of the Graduate Program
of the College of Business and Accountancy
Central Philippine University, Philippines
In Collaboration with
Thai Nguyen University, Vietnam

In Partial Fulfillment
Of the Requirements for the Degree
DOCTOR OF MANAGEMENT

By

TRUONG THI VIET PHUONG
MARCH 2017


i
ACKNOWLEDGEMENTS

This dissertation has been conducted in the Doctoral Program in Business
Management within the framework of academic cooperation between Central Philippine
University and University of Economics and Business Administration, Thai Nguyen
University. During the period of writing my dissertation, I have gained precious knowledge
for my job as well as my scientific research work.
First and foremost I would like to express my sincere thanks and appreciation to my

official supervisor, Assoc. Prof. Dr. Do Anh Tai and his co-supervisor, Dr. Roldan Pila
Pescos for their ideas, guidance, encouragement, support and a lot of prayers all throughout
the process.
I would like to express my gratitude to the officials who freely gave me their time for
the interviews. The interviews that were granted to me at the enterprises with the managers
have provided their perspective for the purpose of this study.
I would like to express my deep gratitude to the leaders of the Business Registration
Division of Thai Nguyen Provincial Department of Planning and Investment, Thai Nguyen
Provincial Department of Industry and Trade, Thai Nguyen Provincial Bureau of Statistics
and the leaders of the Small and Medium Enterprises (SMEs) in Thai Nguyen Province who
have made favorable conditions and helped me in collecting the secondary data and
information during my survey and investigation in their enterprises.
My thanks also go to all of my professors of the Doctor Program in Business
Administration and the managers and staffs of the International Cooperation Centre for
Training and Study Abroad of Thai Nguyen University of Economics and Business
Administration (TUEBA) for their enthusiastic help in my research and dissertation.
I also would like to thank my interview partners who conducted the survey with me.
My thanks also extend to all of my colleagues who have encouraged me to do the
dissertation.
Last but not least, I specially would like to give my innermost thanks to my family
who have always encouraged and helped me during the time of doing my dissertation.

Thai Nguyen, March 2017

Truong Thi Viet Phuong


TABLE OF CONTENTS
ACKNOWLEDGEMENTS ........................................................................................................... i
LIST OF TABLES ........................................................................................................................ ii

LIST OF CHART AND FIGURES ............................................................................................. iii
LIST OF ABBREVIATIONS AND ACRONYMS .................................................................... iv
ABSTRACT .................................................................................................................................. v
CHAPTER 1. INTRODUCTION .............................................................................................. 1
1.1. Background and Rationale of the Study ................................................................................ 1
1.2. Objectives .............................................................................................................................. 3
1.3. Theoretical Framework .......................................................................................................... 3
1.3.1. Some economic theories and their application for management accounting ......................... 3
1.3.2. Some foundation theories relating to the research contents of the dissertation........................ 8
1.4. Conceptual Framework ........................................................................................................ 10
1.5. Research Hypotheses ........................................................................................................... 13
1.6. The Operational Definitions ................................................................................................ 13
1.7. Scope and Limitation ........................................................................................................... 15
CHAPTER 2. REVIEW OF RELATED LITERATURE AND STUDIES ......................... 17
2.1. Overview of small and medium enterprises......................................................................... 17
2.1.1. Concept ............................................................................................................................. 17
2.1.2. Characteristics of small and medium-sized enterprises .................................................... 20
2.1.3. The role of small and medium-sized enterprises .............................................................. 20
2.1.4. Opportunities, challenges, of the SMEs in Vietnam in the process of economic
development and global integration .................................................................................. 23
2.2. Corporate governance .......................................................................................................... 27
2.2.1. Definition .......................................................................................................................... 27
2.2.2. The role of corporate governance ..................................................................................... 28
2.2.3. The content of corporate governance ................................................................................ 29
2.2.4. The functions of corporate governance............................................................................. 29
2.3. Roles and functions of Management Accounting ................................................................ 32
2.4. Contents of Management Accounting ................................................................................. 32
2.5. Management Accounting of Enterprise ............................................................................... 33
2.5.1. Conception ........................................................................................................................ 33
2.5.2. Essence of Management Accounting ................................................................................ 34

2.5.3. Methods of Management Accounting ............................................................................... 34


2.3.3. Information of management accounting and function of enterprise management ............ 37
2.3.4. Organizations of management accounting in enterprises .................................................. 39
2.3.5. Organizing machine model of management accounting in enterprise .............................. 41
2.4. Review of previous studies .................................................................................................. 43
2.4.1. International studies .......................................................................................................... 43
2.4.2. Domestic studies ............................................................................................................... 45
2.5. Research gap and the author‟s research orientation ............................................................. 49
CHAPTER 3. METHODOLOGY ........................................................................................... 51
3.1. Research process .................................................................................................................. 51
3.2. Research method .................................................................................................................. 52
3.2.1. Data collection method ..................................................................................................... 52
3.2.2. Quantitative research ........................................................................................................ 53
3.2.3. Analysis method, data processing method ........................................................................ 54
3.3. Research design ................................................................................................................... 55
3.3.1. Research samples .............................................................................................................. 55
3.3.2. Investigation method ......................................................................................................... 57
3.3.3. Design measurement scale ................................................................................................ 57
3.3.4. Design questionnaire ......................................................................................................... 59
3.4. Research model and hypothese ............................................................................................ 60
3.5. Data processing method ....................................................................................................... 60
CHAPTER 4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION ........... 64
4.1. Small and medium-sized enterprises in Thai Nguyen province and current situation of
management accounting .................................................................................................... 64
4.2. Descriptive statistics of respondents .................................................................................... 65
4.3. Research Sample Description and Reliability Analysis of Scale......................................... 68
4.3.1. Survey Variable Description, Statistics and Analysis....................................................... 68
4.3.2. Reliability Analysis of Scale ............................................................................................. 72

4.4. Exploratory Factor Analysis ................................................................................................ 74
4.5. Linear regression analysis and hypodissertation test ........................................................... 78
4.5.1. Correlation Analysis ......................................................................................................... 78
4.5.2. Regression Analysis .......................................................................................................... 79
4.5. Test of the difference ........................................................................................................... 84
4.5.1. Independent Sample Test .................................................................................................. 84
4.5.2. One Way Anova test ......................................................................................................... 84
4.6. Research and discussion result............................................................................................. 85


CHAPTER 5. SUMMARY, CONCLUSION AND POLICY RECOMMENDATIONS ... 90
5.1. Summary............................................................................................................................ 90
5.2. Conclusion ......................................................................................................................... 104
5.3. Recommend solutions ........................................................................................................ 105
5.3.1. Management support solution implication ...................................................................... 105
5.3.2. Strategic link solution implication................................................................................... 106
5.3.3. Quality standard application solution implication ........................................................... 107
5.3.4. Labor and inventory solution implication ....................................................................... 108
5.3.5. Strategic vision solution implication ............................................................................... 110
5.4. Limitations of the research................................................................................................. 113
REFERENCES ........................................................................................................................ 114
APPENDIX .............................................................................................................................. 117


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LIST OF TABLES

Table 2.1: Classification criteria of small and medium-sized enterprise in some countries ........ 17
Table 2.2: Classification of SMEs in Korea ................................................................................. 18
Table 2.3: Classification of SMEs in Vietnam according to Decree No. 56/2009/ND-CP ................ 19

Table 3.1: Offical measurement scale ......................................................................................... 58
Table 4.1: Personal information of the enterprises owner, the chief accountant, accounting
manager or representative for enterprises in Thai Nguyen province ...................... 66
Table 4.2: Observable Variable Description and Statistics ........................................................ 69
Table 4.3: Test reliability of the scale ......................................................................................... 73
Table 4.4: Results of reliability calculation of scale ................................................................... 74
Table 4.5: Exploratory Factor Analysis (EFA) of independent variables .................................. 75
Table 4.6: Exploratory Factor Analysis (EFA) of dependent variables...................................... 76
Table 4.7: Results of Exploratory Factor Analysis ..................................................................... 77
Table 4.8: Correlation analysis of factors affecting the use of management accounting of
SMEs in Thai Nguyen .............................................................................................. 78
Table 4.9: Determination coefficient .......................................................................................... 79
Table 4.10: ANOVA variance analysis ...................................................................................... 79
Table 4.11: Multicollinearity test ................................................................................................ 80
Table 4.12: Coefficients of the regression model ....................................................................... 82
Table 4.13: Testing result of the hypodissertation pair............................................................... 83
Table 4.14: Independent Sample Test ......................................................................................... 84
Table 4.15: One Way Anova test ................................................................................................ 85


iii
LIST OF CHART AND FIGURES

Chart 1.1: Functions of administration ....................................................................................... 31
Diagram 2.1: The relationship between information of management accounting
information and function of enterprise management ............................................... 38
Diagram 2.2: Organizational machine of management accounting in enterprises .................... 42
Figure 1.1: Analysis framework of the dissertation..................................................................... 12
Figure 3.1: Research process ...................................................................................................... 51
Figure 3.2: Research model ........................................................................................................ 60

Figure 4.1: Scatterplot graph....................................................................................................... 81
Figure 4.2: Histogram of the standardized residuals .................................................................. 81


iv
LIST OF ABBREVIATIONS AND ACRONYMS

1. E: Enterprise
2. BA: Business Activity
3. SMEs: Small and Medium Enterprises
4. FS: Financial Statements
5. WTO: World Trade Organization
6. GRDP: Gross Regional Domestic Products
7. PC: People‟s Committee
8. MA: Management Accounting
9. TPP: Trans-Pacific Partnership Agreement


v
ABSTRACT
There have been a lot of studies and scientific researches on management accounting with
many different topics and scopes. However, all of them have focused on state-owned enterprises
and big and strong economic corporations of Vietnam only, none on the SMEs. The SMEs in
Vietnam have its own characteristics, so effective management requires proper management
accounting information. This study has assessed the actual use of management accounting of the
SMEs in Thai Nguyen Province, identified and analyzed the factors affecting the tendency to use
management accounting in the SMEs in Thai Nguyen Province in order to propose the solutions to
enhance management accounting of the SMEs in Thai Nguyen Province.
The author has collected 200 survey questionnaires (corresponding to 200 samples) from
the SMEs in Thai Nguyen Province, among which limited liability companies account for about

45%, join-stock companies about 33%, private enterprises about 13% and the others account
for the rest.
Surveying 200 SMEs in Thai Nguyen Province has shown that the use of management
accounting in the SMEs is directly affected by five factors in the assumed model, which are
Management Support (TN), Strategic Vision (TC), Strategic Link (LK), Inventory Labor (LT),
Quality Standards Application (CL) and Dependent Variable of Management Accounting Use
of the SMEs in Thai Nguyen Province (SD). From these findings, the dissertation has made
effective measures to enhance management accounting in the SMEs of Thai Nguyen Province.
This will be a scientific contribution of the author in applying theories to the SMEs in Thai
Nguyen Province.


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CHAPTER 1. INTRODUCTION
1.1. Background and Rationale of the Study
In Vietnam, over the years, SMEs have developed throughout the country and they
are considered the „backbone‟ of the economy. Currently, along with the process of
economic reform, Vietnam has been actively promoting international economic
integration; especially, Vietnam has joined the World Trade Organization (WTO), a global
trade organization. The process of integration has a strong impact on the economy in
general and businesses as well as SMEs in particular, which has set up a more favorable
business environment, helping SMEs have more opportunities to develop.
When starting the international integration, enterprises in Vietnam in general and the
small and medium-sized enterprises (SMEs) in particular face new opportunities and
challenges. With small production scale, difficulties in access to funding and low-level
employees etc..., especially SMEs are not used to applying management accounting to
operation, so they are at a disadvantage when competing with large corporations and
foreign corporations. Under the general terms when joining the WTO and other trade
organizations such as ASEAN or the signing of free trade agreement between Vietnam and
the Eurasian Economic Union on May 29, 2015, Vietnam has to gradually dismantle tariff

barriers so that trade becomes easier. But it also means that the level of competition will
become more acute (The Working Committee on the Accession to WTO of Vietnam,
2006). However, a worrying problem herein is that Vietnam‟s economy has slow reform
from its inside due to the characteristics of transform from subsidized economy into
socialist-oriented market economy. Therefore, SMEs not only take advantage of many
opportunities but also face many difficulties created by integration process.
Once the business environment changes according to the trend of global integration,
Vietnam‟s managers must cope with a major challenge which is that they have to use new
management tools in order to respond and increase competitive advantage of their
businesses. Therefore, more than ever SMEs have to rapidly use management accounting
to help managers get the timely, appropriate and effective information to support the
decision-making process. However, because the market economy has been formed later
than other countries in the world, teaching of management accounting in Vietnam only
started in the early 1990s of the 20th century; therefore, today most of the accounting
departments in SMEs in Vietnam are still unfamiliar with the use of management
accounting. Through the author‟s preliminary survey as well as previous researches, so far
the application of management accounting to management operations in SMEs are still


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limited; consequently, the application rate of management accounting in SMEs in general
is still low, applied technical tools of management accounting are mostly traditional
technical tools and the effectiveness contributed to management affairs is not high.
However, in fact the application of management accounting is influenced by many factors
inside and outside the enterprise, and these factors may increase the feasibility of applying
management accounting in SMEs in Vietnam or and vice versa.
Although 2015 was a difficult year for the national economy in general and economy
of Thai Nguyen Province in particular, with the efforts, creativity and determination of
both political system and business community, the province has successfully completed its
task: Its Gross Regional Domestic Products (GRDP) in 2015 was estimated to increase by

25.2% compared to them in 2014, in which the agriculture, fishery and forestry increased
by 4.8%, contributing 0.84 percentage points to the overall growth rate; industry and
construction went up by 45.5%, contributing 21.4 percentage points; the service sector
increased by 8.4%, contributing 3 percentage points to the overall growth rate. (according
to Report No. 235/BC-UBND dated 13/11/2015 of Thai Nguyen Provincial People‟s
Committee on reporting results of implementing socio-economic development tasks in
2015). To achieve these important results, Thai Nguyen has always recognized the efforts
of enterprises in production and business activities, and their efforts to overcome
difficulties and preserve their sustainable value, maintain life and stable jobs for their
employees, and have effective contributions to the local budget. At the same time, the
enterprises always take good social responsibility, pioneer in poverty reduction, actively
participate in humanitarian activities, charitable activities, social welfare activities, etc…
However, in the situation of international economic integration and multilateral
cooperation at present, the SMEs in Vietnam in general and those in Thai Nguyen Province
in particular are not only under the competitive pressure with domestic companies but also
compete more severely with multinational corporations which are much more powerful in
terms of capital, trademark and management skills. Thus, to be competitive, Vietnamese
SMEs have to find themselves a reasonable path for their own survival and development.
One of the necessary solutions is to save production costs and improve management
efficiency, etc… in which accounting information plays an important role as basic
information. Therefore, if SMEs want to have sustainable development, they must have
good and efficient accounting system. However, few SMEs can accomplish that goal
because most of them are the newly established enterprises with limited capital. Having a
good accounting system requires enterprises to invest heavily, so few companies are able
or dare to do this. Therefore, the commonly current solution is hiring professional


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accountants to work overtime or hiring low level ones with affordable costs. Consequently,
businesses will have an inefficient accounting system, not providing timely information for

decision making. Thus, it is urgent to raise the awareness of role of accounting system in
general and management accounting in particular for SMEs to overcome difficulties, enhance
the efficiency of managers‟ decision-making for sustainable development of enterprises. From
the above-mentioned reasons, the author has chosen the dissertation: The solutions to
enhance the use of management accounting in small and medium enterprises in Thai
Nguyen Province as her doctoral dissertation so as to contribute theoretical and practical basis
to management accounting activities of SMEs.
1.2. Objectives
• Overall objective
Along with systematizing theoretical and practical basis of management accounting
in SMEs, the dissertation will analyze and assess the situation of the role of corporate
management accounting system. It will identify and analyze the factors affecting the
tendency to use management accounting in the SMEs in Thai Nguyen Province to propose
solutions to contribute to enhancement of management accounting use in the SMEs of Thai
Nguyen Province.
• Specific objectives
- Systematizing the theory for SMEs and corporate management accounting
- Assessing the situation and role of corporate management accounting system
- Identifying and analyzing the factors affecting the tendency to use management
accounting in the SMEs in Thai Nguyen Province
- Specifying the nature of limitation and inadequacy of management accounting to
provide the solutions that enhance the efficiency of use of management accounting in the
SMEs in Thai Nguyen Province
1.3. Theoretical Framework
1.3.1. Some economic theories and their application for management accounting
Management accounting is a set of techniques to support management functions with
the goal of enhancing the value of organization (Chenhall, 2007; Răc and Williamson, 2007).
Management accounting is motivated by the needs of managers but not by the stakeholder.
Through the use of techniques, management accounting is affected by different organizations,
behavioral factors, and socio-economic factors. Therefore the theories: Prevention theory,

agency theory, sociological theory and psychological theory are applied frequently in the
management accounting research. Applying different theories of management accounting
research allow researchers to understand management accounting from different perspectives,


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to evaluate the effectiveness of various techniques of management accounting (Maleen &
Michael, 2009).
1.3.1.1. Prevention theory
Researchers of traditional organizational theory believe that it is possible to determine
the optimal structure for all organizations (Fayol, 1949; Taylor, 1911; Weber, 1946). However,
in fact, organizational structure has a significant change. The contemporary theorists believe
that there is not only the “best” organizational structure for the organizations. The performance
of an organization depends on the conformity with its organizational structure and contextual
variables such as environment, strategy, technology, scale, culture (Chenhall 2007). The
suitable theories between organizational structure and contextual variables are collectively
known as Prevention theories
According to prevention theory, management accounting is considered as part of
organizational structure. Researching management accounting through prevention theory is
process of adjusting suitability between detailed management accounting and contextual
variables in an organization. Variables such as the external environment, technology,
organizational structure and scale (Otley 1980; Waterhouse and Tiessen 1978) has been
studied by researchers of management accounting for over 25 years. In last two decades of the
20th century, the researchers of management accounting changes variables as culture (Harrison
and McKinnon 1999) and strategy (Langfield- Smith 2006). Besides, technology is variable
affecting vary greatly to management accounting research. Changes in technology used by
organizations often lead to changes in requirements of institutions on management accounting.
For example, organizations use technology of mass production in manufacturing, process of
manufacturing requires budgeting system supporting management of daily activities (Chenhall
2007). On the contrary, organizations applying complex production technology and requiring

the control and flexible control should encourage staffs to react quickly with different
situations (Woodward 1965). With the introduction of modern management initiatives such as
Just-in time (JIT) and total quality management (TQM), organizations need effective means to
measure the results of strategic initiatives of the administrators. Managing control system of
strategic alliance and operating as Balanced Scorecard to be suitable with the demands of
administrators.
In the mid of 1960s, prevention theory was developed and used by researchers of
management accounting between 1970s and 1980s. Prevention theory has significant
importance in researching management accounting because it dominates behavior accounting
since 1975. Moreover, prevention theory is widely used in research of management accounting
of Otley (1980).


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Prevention theory researches enterprise management accounting in interactive
relationship with the operating environment of enterprises. In other words, a management
accounting system to be suitable with enterprise depends on features of enterprise and
environment. It shows that it is impossible to build a pattern model of management accounting
to apply for all Vietnam enterprises, that applying management accounting on enterprise must
depend on the particular characteristics of each sector, each production sector, at the same time
to be suitable with the organizational structure, enterprise scale, production technology level
and organizational strategy in each stage. It means that building a management accounting
system must be adapted to each enterprise, the internal and external environment
1.3.1.2. Agency theory
The second type of theory is agency theory. According to Jensen and Mec-Kling
(1976) determine the representative relationship (or fiduciary relationship) as the contractual
relationship under which the shareholders (the principals), appoint, assign others, the company
manager (the agents), to carry out their management which including the granting authority to
decide asset disposition of the company. Agency theory said that if both sides in this
relationship (shareholders and company manager) want to maximize benefits, there is basic to

believe that the company manager will not always act because of the best interests of the
owners, i.e the shareholders. Representative relationship is also expressed in the relationship
between senior managers with junior managers in a decentralization system, between
managers with the person directly using resources of organization.
Agency theory said that conflict will arise when having incomplete and
asymmetric information between the subject and the representative of the company. Both
parties have different interests and this issue is minimized by using appropriate
mechanisms to limit the interest divergence between shareholders and managers of the
company, through the establishment of the appropriate compensation scheme for
managers, and the establishment of effective monitoring mechanisms to limit the abnormal
behaviors, self-interest of the company managers.
According to Healy and Palepu (2001) optimal contract between manager with
investor, remuneration agreement and bonus of administrator, solution on benefit
harmonization between business administrator (and business owners) with benefit of
external investors. These contracts usually require business to use information provided by
the management accounting system, such as budget system, cost control information,
allocation of resources, etc. in order for investor to assess compliance with commitments in
contract and assess business administrators having resource management of company
associated with benefits of external investor.


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Agency theory explains reason to apply the responsibility accounting system in
business and what joint-stock companies, companies listing management accounting
system need provide to assure benefit for investors and shareholders. Especially, in
condition of Vietnam, when there is no stock market completely developed, the
information of business management accounting provided accurately and fully is really
meaningful for investors.
Agency theory is also basis to build the internal reports in business, the reports assessing
responsibilities to be appropriate with the decentralized system in Vietnam enterprises.

1.3.1.3. Sociological theory
Sociological theory focuses on how to establish organization through interaction
between people, organizations and society. Covaleski and his partners (1996) said that the
existence of an organization requires the suit with social on acceptable behaviour to
achieve a high level of production efficiency.
The sociological theorists consider management accounting system in terms of
social practice than just in terms of technique to make internal decision and organizational
effectiveness. Reality of management accounting reflects the political power and society.
For example, Wildavsky and Caiden (2003) argued that the budget system can be used for
other purposes apart from control issues as using the budget to establish and maintain
current power relationships, the political nature of budget is often observed in complex
social life. Views on labor process in works of Carl Marx emphasized the class division in
society, conflicts between labor, wage and the capitalists. From standpoint of the capitalist,
it is necessary to minimize labor and maximize surplus value, unlike other factors of
production. Therefore, the investors must control labor as well as labor process. Through
some works of Hopper and Armstrong (1991), Collinson (1987), Oakes and Covaleski
(1994), the authors argue that the management accounting and cost information are tools to
exploit production effectively.
Foucault (1926-1984) used approach to research management accounting in a wider
political and social context. A kind of sociological theory is often used as agency theory. It
explains the process of institutionalization by which standards or habits become guidelines
for social behaviour (Scott 2004). As Covaleski et al. (1996) indicated that conformity with
the social norms of acceptable behaviour and a high level of efficiency production are
relatively important for the survival of an organization.
Sociological theory suggests management accounting system in business is not only
the internal issues in business but also affected in a general social context, it relates to
current regimes and policies, and addresses the relationship with workers in business.


7

Therefore, the targets set out by business must lie in the common targets accepted by
society. It is consistent with the trend of sustainable development and benefits of business
must be associated with the common benefits of society. For example, the cost standards
must be built on the basis of common norms of sector, or making plan on wage costs must
be based on the minimum wage prescribed by the State, information of management
accounting cost provided will be also affected by the provisions of policies on tax and
finance of the State
1.3.1.4. Psychological theory
Psychological theory has been used to research management accounting (MA) for
over 50 years, Argyris (1952, 1953) has been based on the relationship between the human
and group dynamics to investigate the social context of budget.
This theory emphasized the role of human in organizations, this group supposed
that the labor productivity was not only decided by physical factors, but also due to the
psychological and social needs of the human. “Organizational issue is human issue”, and
they pointed out that, in classical school, there were number of limitations for ignoring the
human factor in the course of working.
The author of the theory about human relationships in organization was Mary
Parker Pollet (1868 - 1933). He said that, in the course of working, employees had
relationships with each other and with managers. And the author also emphasized that the
effectiveness of management depended on the resolution of these relationships. The
authors of human behavior believed that human activities heavily depended on the
psychosocial factors. It is these factors that create the good relationships in the course of
working, thereby achieving high performance in the working process.
Human is one of the most important components of organizations, plays an
important role in the activities of organizations. When individual behaviors are consistent
with an organization‟s goals, this organization will prosper. To understand the impact of
individual behaviors to an organization, psychological theory will be applied in MA
research to study the relationship between individual behaviors and MA (Birnberg et al.
2007) in the process of budgeting, controlling and making decisions.
Stedry (1960) used motivation theory to investigate the impact of budget targets to

individual performance. Hopwood (1972) used this concept from the psychological theory
for the research in which the superior used accounting information to assess subordinate
and the influence of subordinate with other employees
In the 1970s, MA used psychological theory for the research of how individuals
handle information for planning, controlling and making decisions. Et al Mock (1972)


8
investigated the interaction feedback of MA with individual awareness and style to affect
executive decisions. Psychological theory could be used to explain both causes and
impacts of MA to individual behaviors.
Psychological theory pointed out that the establishment and operation of MA system in
enterprise must be considered the impact to the human relationship within the enterprise
(relationship between superior with subordinate, relationship among departments in enterprise
with each other). This relates to the process planning budget, controlling, assessing and making
decisions that must create motivation and aim at the performance enhancement of the
departments. For example, if the establishment of cost targets and assessment criteria are only
interested in cutting costs without paying attention to improve performance and solve the
harmony of interests among the departments in enterprise, it may not encourage people in the
enterprise strive to reduce costs and increase profits.
The research of theories has practical meaning in building the MA model and
application contents in each type of enterprise and in different economies. The theories
used in MA research are the foundation and the go-off to determine MA contents for each
enterprise and apply effectively. At the same time, the theories also point out that MA
system of enterprise is truly effective only when it is built and developed in accordance
with the actual conditions of each type of enterprise and in different economies. That also
means no MA model can be applied to all enterprises in Vietnam, the application of MA in
enterprise also depends on characteristics of business lines or sectors, organization
structure of management apparatus, enterprise size, technological level and current
business environment. And with the rapid changes of production technology and global

business environment, MA system in enterprise also needs to change and adjust flexibly to
achieve efficiency and meet the requirements of managers.
1.3.2. Some foundation theories relating to the research contents of the dissertation
The research and analysis of the factors affecting the tendency of management
accounting use in Small and Medium-sized Enterprises (SMEs) in Thai Nguyen province
to provide solutions to enhance the role of management accounting in SMEs in Thai
Nguyen should be based on several foundation theories in order to ensure the logic,
science and the solutions are feasible and beneficial for enterprise and objects using
information as well as for the whole society. The content of some theories is used as the
foundation theory for the research including:
1.3.2.1. Signaling theory
Basic content of signaling theory:
This theory was firstly introduced by Spence in 1973, in the imperfect market and
asymmetry of information. This theory was applied widely in many sectors, especially in


9
management theory. This theory described behaviors of two different sides accessed to
information, the provider must select to communicate and convey which information and
how, and how the receiver must understand the information. In the field of accounting in
general and management accounting in particular, the level of imperfection and asymmetry
on information is usually very high. Because, in the enterprise standpoint, accounting staff
in enterprise must play the role of information “producer”, as internal objects who are
accessed to internal information more clearly, earlier and know exactly about information
quality provided by them while the users usually face difficulties in accessing, determining
and assessing the quality of accounting information published by the enterprise.
The relationship between signaling theory with research content of the dissertation:
Through the basic content of the signaling theory introduced above, it indicated that
this theory has placed a basic issue when studying and analyzing the factors affecting the
tendency of management accounting us in SMEs in Thai Nguyen province in order to

propose solutions to enhance the role of management accounting in the SMEs in Thai
Nguyen province, thereby the regulators should promulgate clearly and uniform
regulations on methods of handling, information disclosure requirements and the
enterprises should strictly apply and comply with the regulations to reach useful
information of management accounting, responding the requirements of the users.
1.3.2.2. Decision-usefulness theory
Basic content of the theory:
The determination of use level of financial information of the users is based on
theoretical foundation on the usefulness to decision making (Staubus, 1961, 1977;
according to Dang Duc Son et al, 2006). This theory was firstly acknowledged
widely in 1973 with target view to consider financial report (FR) as provision of
information to be basis of decision making. In the 1980s, the decision-usefulness theory
was regarded as the foundation to build international accounting standards, as the basis to
assess the effectiveness of using information to decision making of the users of
accounting information. The development period of this theory was in the second haft of
the 20th century when FR were criticized for providing too little information for the users
in decision making (Edwards, 1989), leading to the wrong decision.
The relationship between this theory with research content of the dissertation:
According to the decision-usefulness theory, accounting is considered as a process
of appropriate information provision to the users. Therefore, the information usefulness is
assessed through its support level to the users in making decision. This is foundation of the
information disclosure, theoretical and practical basis of the decision-usefulness theory that


10
plays an important role in the history of financial accounting and promulgation process of
accounting standards in developed countries. Applying the research and analysis of factors
affecting the tendency of management accounting us in SMEs in Thai Nguyen province in
order to enhance the role of management accounting in the SMEs in Thai Nguyen
province, is not an exception. When promulgating legal regulations on management

accounting to these enterprises, it must be based on the decision-usefulness theory,
whereby the issued regulations should take into account of the appropriateness,
effectiveness and feasibility to reach the final target to provide the most appropriate and
helpful to the users.
1.3.2.3. Stakeholder theory
Basic content of the theory:
Stakeholder theory of Freeman was introduced in 1984. According to this theory,
enterprise should pay attention to the relationship with relevant objects such as creditors,
employees, suppliers, customers, State management authorities, etc., in addition to traditional
relationships as manager – owner, because these stakeholders directly affect the survival and
development of enterprise. Accordingly, the activities of enterprise should be carried out based
on the needs, interests and perspectives of different parties.
The relationship between this theory with research content of the dissertation:
In the field of management accounting, this theory is applied as the basis for useful
information disclosure in order to meet the requirements of the different users in the
economy for the types of enterprise in general and for the SMEs in general. In addition,
the regulators should pay attention to the basis of this theory when promulgating
regulations related to the handling, presentation and disclosure of accounting information
to ensure the harmony of interests of the parties, between the enterprise providing
information and the information users as well as among information users with each other.
This content is also thoroughly applied in research and analysis the factors affecting the
tendency to use management accounting in the SMEs in Thai Nguyen province in order to
provide solutions to enhance the management accounting use in the SMEs in Thai
Nguyen province.
1.4. Conceptual Framework
The concepts of MA
Most revolutions on the change of MA concept can develop based on three main
schools; those are the development from the concepts of Institute of Management
Accounting, the US (IMA), Charter Institute of Management Accounting (CIMA) and
International Federation of Accountant (IFAC).

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In 1981, IMA introduced its first concept of MA based on the reflection on the
changing needs of enterprise for accounting information; however, most recently in 2008,
IMA launched the concept of the work of MA was: “… a professional work relates to the
participation in the process of decision making, planning and implementation system, and
provides professional financial reports, helps managers to control the establishment and
performance of the organization‟s strategy” (Anthony A. Atkinson et al., 2012). The
change in MA concept of IMA reflected the trend of changing the role of MA that
increasingly expresses a role as a factor of business strategy to help enterprise managing its
performance, planning and making estimate, managing risks, controlling internally,
preparing financial report in the time of great changes, and expressing its professional role
in the cost management methods (IMA, 2008).
According to CIMA (CIMA, 1986, 10), MA means to provide information to
managers aiming the purposes: creating policies, planning and controlling enterprise‟s
activities, making decisions based on different choices, preparing financial reports for
external groups such as shareholders, creditors, tax authorities, etc. Later, in the process of
MA terms adjustment (CIMA, 2005, 18), the role of MA has many advances and shown a
broader role. It was redefined as the application of accounting principles and financial
management in order to create, protect, maintain for long-term and increase value of
shareholders and stakeholders in for-profit and nonprofit enterprises, in individual or
public areas. Accordingly, CIMA has redefined MA in a more detailed way, expressed that
MA was an important part of management process in which including the identification,
creation, presentation, interpretation of appropriate information. The change in MA
concept of CIMA shows that MA has approached closely the concern of senior executives
on focusing on the effectiveness, strategic planning, and value creation. So far, according
to the trend of 2015, CIMA has introduced the concept of MA that simply implies
accounting, finance and management with the leading management tools (CIMA, 2015).
Similarly, in the first definition of IFAC in 1989, MA “...was a process of identity,

measurement, syndissertation, analysis, preparation, interpretation, and communication of
information (in both finance and operation) used by managers for the purpose of planning,
measuring and controlling an organization, and to ensure that the resources of such
organization are used appropriately and responsibly.” This concept was similar to the
initially traditional concept of other organizations like IMA. After 9 years, however, in
1998, IFAC adjusted and expanded significantly the role of MA in its concept.
Accordingly, MA was considered as activities engaged and interlaced with all management
operations of organization. In other words, MA was towards administrative role in order to


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focus on creating value to the organization by using efficiently resources with dynamic
people in competitive situations. And later, under the new concept in MA of IFAC (2002),
“… MA is towards the handling and technical process, focuses on the effective and
efficient use of an organization‟s resources, supports managers to fulfill add value tasks for
customers and shareholders (Langfield-Smith & ctg., 2009, 6).
According to Accounting Law in Vietnam, MA is defined as “… the collection,
processing, analysis and provision of economic and financial information at the
management request and economic, financial decision in an internal accounting unit”
(Accounting law, clause 3, article 4).
Summary of analysis framework of the dissertation is as follows:
Dissertation targets

Analysis of the
evaluation,
review of the
businesses
surveyed on
the use of
management

accounting in
SMEs
Thai Nguyen
province

Qualitative Research
Method and
Quantitative Research
The solutions
to improve the
use of
management
The rules and
international practice
of management
accounting in
SMEs

accounting in
Overview
of research

medium

and

enterprises in

theoretical

Thai Nguyen

basis
Advanced request
management
accounting role in
SMEs in conditions
developing economy
and integration

small and

Province

platform

Qualitative
Research
Method and

Factors

Quantitative affecting the
use of
Reseach
management
accounting in
SMEs Thai
Nguyen

Figure 1.1: Analysis framework of the disseration
Source: author


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1.5. Research Hypotheses
Objectives of this research can be expressed in the following hypotheses:
Hypodissertation H1 - With enterprises have the management support, the
influence level to the use of management accounting depends on the factors of
management support.
Hypodissertation H2 - When applying standards of MA system, the standards will
affect the use of MA
Hypodissertation H3 - With enterprises have strategic vision, the application of MA
will be likely to get higher success.
Hypodissertation H4 - With enterprises pay attention to labor – inventory targets,
the use of MA will be more effectively.
Hypodissertation H5 - With enterprises simplify strategic links, the application of
MA will be likely to get higher success.
1.6. The Operational Definitions
The factors are selected as independent variables: Manager’s support, Labor –
inventory; Applying management standards of management accounting system; Strategic
vision; Simplification of strategic links. Independent variables are the tendency of using
management accounting of the SMEs in Thai Nguyen province.
Independent variables include:
Manager’s support includes: Change management process, Apply Lean
production system, Strategic training for new products, Facilitate to support staffs to finish
the plan.
Labor - Inventory includes 3 factors: Managing inventory is important
accounting function, Cost and product, Labor and inventory cost
Apply standards of management accounting:

Company reduces inventory, Reduce time to set up business activities, Conduct
standardization in production, Apply Kanban system, Apply 5S model
Strategic vision: Commitment of manage for training quality, All staffs are
encouraged to work together to solve company‟s problem, Available trained source, Staffs
have right to monitor, Staffs‟ participant in quality management
Simply strategic connection: Our accounting system has applied for three years ,
Our closing book process is arranged reasonably, Our management accounting system
supports our strategic idea, Our management accounting information system facilitates to
make strategic decision.


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Independent variables are the tendency of using management accounting of the
SMEs in Thai Nguyen province
The importance of the research
In terms of science: The dissertation completed has had scientific contributions as
follows:
Systematizing the general theoretical issues on management accounting in the
SMEs in typical countries in the world and in Vietnam; identifying and analyzing the
factors affecting the management accounting use of the SMEs in Thai Nguyen province,
and proposing solutions to enhance the use of management accounting use in the SMEs in
Thai Nguyen province.
In practical term
For managers in SMEs: Clarifying the actual situation of the management
accounting in the SMEs in Thai Nguyen, analyzing the factors affecting the use of
management accounting in the SMEs; thereby helping the SMEs aware that to survive and
develop in the market economy, the enterprises must renovate their awareness on the
management accounting role. Creating awareness of managers in the SMEs on the
importance of management accounting is a mean to improve performance and maintain
competitiveness in the market.

For accounting in SMEs: The research shows that the organization of accounting
apparatus, work division of financial accounting and management accounting in reasonable
manner, work assignment in accordance with qualifications, professional ability will help
management accounting perform its role of management information provision to
enterprise‟s managers.
For education facilities: This research contributes to provide meaningful
suggestions to improve and unify program, content and training methods of management
accounting in Education facilities with deeply economic major.
In the current reality in Vietnam and in the world, SMEs are developing both in
quantity and quality, dominating in the economy, thus it is time the organization of
management accounting work in the SMEs must put into learning curriculum of the
relevant subjects in schools. In addition to knowledge and capacity of professional
handling, professional ethics of accountant should be paid attention more in the training
process to help applying effectively management accounting into operative practice in
the SMEs.


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The completed dissertation will be stored in the library of Learning Documents
Center, Thai Nguyen University and students, especially student trained in accounting
major may read and apply this dissertation in studying.
The new findings of the dissertation
Reviewing and comparing with the researches done by internal scientists in the
past, the dissertation has had number of new findings as follows:
- Firstly, exploring more factors affecting the use of MA in the SMEs in Thai
Nguyen province.
- Secondly, measuring the influence level of the factors affecting the use of MA in
the SMEs in Thai Nguyen province by using qualitative and quantitative methods.
- Thirdly, from those findings, the author proposed solutions and recommendations
to improve the use of MA in the SMEs in Thai Nguyen province.

Limitations of the dissertation and suggestion for further research direction
In addition to the results achieved, the dissertation cannot avoid a number of certain
limitations. The research sample cannot represent the opinion of all SMEs in Thai Nguyen
province. The selected method of sampling was non-probability with 200 existing
enterprises in various sectors with accounting report, financial report, and tax report at
least 3 years as of December 31st, 2015. Due to the limitations of cost, time, and access
ability, so the size of survey sample was not large as expected. In addition, the cultural
characteristics of Vietnamese people and the sense of personal responsibility in answering
the questions was not high, therefore the obtained survey results may meet the statistic
requirements but the author has not really satisfied.
The dissertation has researched the factors affecting the use of management
accounting in the SMEs in Thai Nguyen province. The research results provided an
adjustment model with 5 affecting factors, however, these factors may not represent the
affecting factors. So, there will be other factors and observed variables affecting the use of
management accounting in SMEs that have not been researched thoroughly in the current
research model due to limitations of surveyed enterprises scope.
. The following research direction
Continuing to research and propose further factors affecting the use of management
accounting in the SMEs in Thai Nguyen province and expanding the research with the
SMEs in Vietnam.
1.7. Scope and Limitation
Scope of content: The content of management accounting in enterprise was studied
under various levels that may be an overall research or separate research for each type of


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enterprise. In this dissertation, the author focused on studying the solution to enhance the
role of management accounting in the SMEs in Thai Nguyen province
Scope of space: Survey object, sizes, and research model were investigated for the
SMEs within Thai Nguyen province.

Scope of time: The research time was in 2014- 2015, survey time was in February 2016.