Project Details
Description
This article examines the linkages between corporate governance and large companies’ management control systems. More specifically, we are interested in whether a specific type of ownership will impact how a company designs and uses management control systems.
For good and natural reasons, in the corporate governance literature, ownership is given a prominent role (REF). For example, family businesses tend to be given specific characteristics (such as being very long-term oriented). At the same time, firms owned by investment companies are managed and controlled differently (as they tend to have a more short-term perspective). Further, the literature on management control systems (Langfield-Smith 1997, Simons 1990; 1995) examines how the design of these control systems has been associated with different types of contingency variables, such as the business environment (a management control system will vary depending on if the domain is “hostile,” dynamic, or more predictable (Burns and Stalker 1961) or business strategy (whether the company develops a low cost or differentiator strategy). However, what has been given less attention in this literature is how different types of ownership impact how companies’ management control systems are designed and used. Therefore, we formulate the following research question: how do different types of ownership influence a company’s design and use of management control systems?
Within the accounting literature, ownership has been approached in different strands. To the literature on financialization (Graaf et al. 2022), ownership is represented through the firm’s interaction with the capital market. This literature pointed out that the pressure from the stock market leads to increased internal use of financial measures. The capital market interaction disciplines the company in taking certain decisions and strategic routes (Roberts et al. 2006; Ezzamel 2008). Furthermore, these studies also identified that time becomes a factor in the disciplining process, not only in the quarterly follow-ups but also in how performance measures are introduced, such as the internal rate of return (IRR). This measure has a built-in time component that will make companies make decisions in specific ways and prioritize solutions (Christner and Strömsten 2015). What is lacking is a link to how ownership influences the practical financial and management control in terms of budgets, a delegation of decisions, and if belief systems (Simons 1995) are more prominent in a specific type of owner-led company. Those who own are expected to create a return, which is transferred to their own companies. And we know that owners control investments ownersfferent ways and that some owners or investors own a company for “life” while others only for a short period. We also know that the engagement differs and how much and in what way investors get involved as an owner. Their voice and exit strategies (Hirschman 1970) affect how financial management controls are designed. So far, there has been a lack of studies and data that can answer questions like the above.
A long-term perspective and active owners characterize family-owned companies. This means that owners' values informally affect direct and boundary systems. While controlling remotely, the need for formal boundary systems is more significant. Power is concentrated in the core of decision-makers. About the other forms of ownership, they have less traditional control systems. Delegation and authority systems imply that these companies are more centralized and combine this with informal governance to transfer boundaries and values.
For good and natural reasons, in the corporate governance literature, ownership is given a prominent role (REF). For example, family businesses tend to be given specific characteristics (such as being very long-term oriented). At the same time, firms owned by investment companies are managed and controlled differently (as they tend to have a more short-term perspective). Further, the literature on management control systems (Langfield-Smith 1997, Simons 1990; 1995) examines how the design of these control systems has been associated with different types of contingency variables, such as the business environment (a management control system will vary depending on if the domain is “hostile,” dynamic, or more predictable (Burns and Stalker 1961) or business strategy (whether the company develops a low cost or differentiator strategy). However, what has been given less attention in this literature is how different types of ownership impact how companies’ management control systems are designed and used. Therefore, we formulate the following research question: how do different types of ownership influence a company’s design and use of management control systems?
Within the accounting literature, ownership has been approached in different strands. To the literature on financialization (Graaf et al. 2022), ownership is represented through the firm’s interaction with the capital market. This literature pointed out that the pressure from the stock market leads to increased internal use of financial measures. The capital market interaction disciplines the company in taking certain decisions and strategic routes (Roberts et al. 2006; Ezzamel 2008). Furthermore, these studies also identified that time becomes a factor in the disciplining process, not only in the quarterly follow-ups but also in how performance measures are introduced, such as the internal rate of return (IRR). This measure has a built-in time component that will make companies make decisions in specific ways and prioritize solutions (Christner and Strömsten 2015). What is lacking is a link to how ownership influences the practical financial and management control in terms of budgets, a delegation of decisions, and if belief systems (Simons 1995) are more prominent in a specific type of owner-led company. Those who own are expected to create a return, which is transferred to their own companies. And we know that owners control investments ownersfferent ways and that some owners or investors own a company for “life” while others only for a short period. We also know that the engagement differs and how much and in what way investors get involved as an owner. Their voice and exit strategies (Hirschman 1970) affect how financial management controls are designed. So far, there has been a lack of studies and data that can answer questions like the above.
A long-term perspective and active owners characterize family-owned companies. This means that owners' values informally affect direct and boundary systems. While controlling remotely, the need for formal boundary systems is more significant. Power is concentrated in the core of decision-makers. About the other forms of ownership, they have less traditional control systems. Delegation and authority systems imply that these companies are more centralized and combine this with informal governance to transfer boundaries and values.
| Status | Not started |
|---|