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Management controls and crisis: evidence from the banking sector

Pall Rikhardsson ( Department of Business Administration , Reykjavik University , Reykjavik, Iceland) (Department of Accounting, Copenhagen Business School , Frederiksberg, Denmark)
Carsten Rohde (Department of Accounting, Copenhagen Business School , Frederiksberg, Denmark)
Leif Christensen (Department of Accounting, Copenhagen Business School , Frederiksberg, Denmark)
Catherine E. Batt (Department of Accounting, Copenhagen Business School , Frederiksberg, Denmark)

Accounting, Auditing & Accountability Journal

ISSN: 0951-3574

Article publication date: 16 February 2021

Issue publication date: 1 June 2021

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Abstract

Purpose

This paper investigates the use of management controls when environmental uncertainty and hostility increase abruptly. Specifically, it explores this in the context of the 2008 financial crisis in six banks located in two countries.

Design/methodology/approach

The paper is based on 26 qualitative interviews with selected managers employed by the six banks. Eight interview guides were developed based on the typology of controls in Malmi and Brown (2008). Respondents explained which changes in management controls occurred after the crisis.

Findings

Both organic and mechanistic management controls were mobilized at the same time to deal with the change. The use of controls played three main roles: (1) guide and control behavior, (2) change internal and external perceptions and (3) discharge accountability. Finally, control use during a crisis evolves as individual managers design and implement controls. There is no “grand design” rationally guiding the design of the overall system of controls.

Originality/value

The use of management controls in dealing with an increase in uncertainty and hostility cannot be labeled either organic or mechanistic, but will depend on the specific type of change in environmental characteristics. Management controls evolve by interaction with outside actors, as well as internal techniques.

Keywords

Acknowledgements

The authors would like to thank Henri Dekker and Bjoern Joergensen as well as the two anonymous reviewers for their constructive comments and suggestions on earlier versions of the paper. Also, the support of CIMA General Charitable Trust is gratefully acknowledged.

Citation

Rikhardsson, P., Rohde, C., Christensen, L. and Batt, C.E. (2021), "Management controls and crisis: evidence from the banking sector", Accounting, Auditing & Accountability Journal, Vol. 34 No. 4, pp. 757-785. https://doi.org/10.1108/AAAJ-01-2020-4400

Publisher

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Emerald Publishing Limited

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