The Impact of Management Accounting Practices on Financial Performance in Saudi Industrial Companies – Field Study

Abstract

Previous studies have concluded that management accounting practices have an impact on the financial performance in industrial companies. The objective of this study is to analysis the impact of management accounting practice on the financial performance in Saudi industrial companies. In addition, this study endeavor to discover the nature of the management accounting practices that Saudi industrial companies apply. A field study was conducted on a sample of 40 Saudi industrial companies which present about %65 of the total of Saudi industrial companies in 2018.

The result of the study revealed that: First: There is a high and reasonable percentage of the application of saudi industrial companies to management accounting practices, where the rate of application of management accounting practices by Saudi industrial companies is about 71%, and this percentage indicates the great awareness in the managers of these companies of the importance of applying management accounting practices and strategies. Secondly, Saudi industrial companies are given greater attention to the application of costing systems, budgeting, and performance measurement indicators, both financial and non-financial, and strategic management accounting methods. Third: There is a positive relation between the application of management accounting practices (costing systems, budgeting, performance measurement indicators, management decision support systems, strategic management accounting) and financial performance in Saudi industrial companies. Fourth: The greatest impact on the financial performance of Saudi industrial companies is due to the effect of the application of cost systems by industrial companies, followed by the application of budgeting systems and then the application of management decision support systems.

This study recommended that there is a need to increase the awareness among the managers of Saudi industrial companies about the importance of applying traditional and modern management accounting practices, training and continuous learning of management accountants and cost accountants of Saudi industrial companies, , the need to establish a special section for management accounting in industrial companies in order to apply appropriate practices and systems and activate their role in improving institutional performance.