Financial management in Malaysia

Financial Management, Mar 2007 by Sulaiman, Suzana, Ramli, Aliza, Mitchell, Falconer

Suzana Sulaiman, Aliza Ramli and Falconer Mitchell report on research into the development of management accounting roles, skills and tools in the nation's firms.

Most organisations in Malaysia have extended their management accounting control systems since the country entered its deep and enduring recession. Our research set out to investigate how these systems have developed and to analyse the specific influential factors that have increased the importance of management accountants' roles, skills and techniques in Malaysian businesses over the past five years.

We collected our data by sending questionnaires to all 2,346 members of CIMA's Malaysia Division, from whom we received 250 usable completed surveys. The questionnaires were divided into the following six sections:

A Organisational background. This section included questions about the respondent's job title and length of service. Only those who had spent at least five years with their current firm were included in the analysis.

B The importance of management accounting tasks and roles. This section asked respondents to rate the significance of various areas of their work over the previous five years on a three-point scale of "vitally important", "of average importance" and "negligible". It also asked them to choose from a list what they thought would be their five most important tasks by 2009.

C The importance of management accounting tools. This asked our sample to rate the significance of various techniques in a similar way to the first part of section B.

D Business managers'views of management accountants. This asked the respondents how they thought their profession would be perceived by their non-financial colleagues over the next five years.

E Management accountants' skills. This asked the respondents to rate the importance of various professional attributes in a similar way to section B.

F Factors that drive changes in management accounting tasks. This asked our respondents to rate the influence on their work of various aspects in a similar way to the first part of section B.

Our respondents rated their firms' customer-orientated activities as the number-one factor driving changes in their tasks and roles, followed by globalisation and their firms' focus on core activities (see panel 1). They also cited IT changes and increasing corporate governance requirements as influential. This finding supports the idea that Malaysian firms have had to become more customer-focused, especially since the enactment of free trade laws exposed them to greater global competition.

Panel 2 shows the coefficient correlation between the factors that have driven management accounting tasks, skills and tools to change. It indicates relatively weak positive relationships ie, the IS listed factors are significantly associated with the changes in tasks, skills and tools. Panel 3 shows that management accounting tasks are positively associated with firms that have focused on customer-orientated initiatives, but are significantly negatively associated with organisational restructuring. From this we may surmise that management accounting tasks are more important in customer-focused organisations, and that they are needed more in less structured organisations.

Panel 4 shows that management accounting skills are significantly positively associated with firms that have focused on their core activities and their customers. Panel 5 shows that management accounting tools are significantly positively associated with firms that have focused on core activities and quality initiatives. But they are significantly negatively associated with those that have faced increased external reporting requirements. In other words, as the importance of external reporting increases to a firm, the importance of management accounting tools decreases.

We can conclude that management accounting in Malaysia has evolved as the country's businesses focus on their core activities and their customers in order to be successful in the global market. Intense national and international competition has, therefore, led Malaysian organisations to be more forward-looking and proactive. This trend has eventually increased the significance of management accountants' tasks, skills and tools.

Suzana Sulaiman is deputy dean in the faculty of accountancy at Malaysia's Universiti Teknologi Mara (UiTM), where Aliza Ramll is senior lecturer.

Falconer Mitchell is department head at the University of Edinburgh's accounting and finance group. They thank CIMA's Malaysian Division and UiTM's Institute of Research Development Centre for its financial support.