Examining the effect of activity-based costing on decision-making and performance using three approaches: evidence from the Saudi manufacturing industry

Abstract

This research aimed to demonstrate the effect of ABC adoption on the outcomes of costing systems related to the extent of cost information usage in decision-making, financial performance, and the non-financial performance of Saudi manufacturing companies. This research addresses the research gaps related to the nature of the direct relationship between ABC adoption and the outcomes, which relate to the following: (1) the approaches used to test the direct relationship between ABC adoption and the outcomes; (2) the used measures for the outcomes of ABC system; and (3) the context of the Saudi manufacturing industry. To achieve the research aim, this research utilized the analytical quantitative methodology using the survey strategy and the questionnaire data-collection method to collect data from 200 Saudi manufacturing companies. The results of this research supported the positive direct relationship between ABC adoption on the outcomes of costing systems related to the extent of cost information usage in decision-making, financial performance, and the non-financial performance, using three different approaches to test this relationship, which depend on the correlation analysis, Two Independent-Samples t-test, and Paired-Samples t-test. Based on these results, this research provides a set of recommendations to enrich the accounting literature and develop the costing systems applied in the Saudi manufacturing industry.