Firm size and cost system sophistication: The role of firm age

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Firm size and cost system sophistication: The role of firm age

journal contribution
posted on 18.10.2021, 15:49 by Wael HadidWael Hadid, Mohammed Hamdan
The costing literature has failed to conclusively explain why some companies implement sophisticated costing systems while others do not. Although some contingency variables were proposed, inconclusive results were reported which raised concerns about their underlying theory. Focusing on firm size, as the most examined and confusing variable in this contingency literature, we develop and test more complex relations than in prior studies to provide more insights into its role. More specifically, we test potential indirect positive relations between firm size and cost system sophistication (through product diversity and cost structure) and bring to light the role of firm age largely neglected in the cost accounting literature. Using two different statistical analyses (i.e. SEM and PLS) and data from manufacturing firms, our findings suggest, in contrast to the majority of prior studies, that not all larger firms should be expected to have sophisticated costing systems. The impact of firm size on cost system sophistication depends on firm age and is mediated by product diversity but not cost structure. We conclude by emphasizing the need for more complex models to further advance the theory on costing systems. Such models should go beyond explaining the potential impact of each contextual variable in isolation.

History

Published in

The British Accounting Review

Publisher

Elsevier

Acceptance Date

21/07/2021

Publication Date

24/07/2021

Version

AM (Accepted Manuscript)

Citation

Hadid, W. and Hamdan, M. (2021) 'Firm size and cost system sophistication: The role of firm age', The British Accounting Review, p.101037. https://doi.org/10.1016/j.bar.2021.101037

Print ISSN

0890-8389

Cardiff Met Affiliation

  • Cardiff School of Management

Cardiff Met Authors

Mohammed Hamdan

Cardiff Met Research Centre/Group

Welsh Centre for Business and Management Research

Copyright Holder

© The Publisher

Language

en