Impacts of activity-based costing on organizational performance: evidence from Thailand
ISSN: 1321-7348
Article publication date: 7 May 2020
Issue publication date: 5 August 2020
Abstract
Purpose
To extend the limited yet conflicting results of prior studies, this paper hypothesizes and statistically tests alternative, structurally different models of likely positive impacts of activity-based costing (ABC) on organizational performance (OP). It also tests moderating effects of business type and business size.
Design/methodology/approach
To test the models' abilities to explain the data, this comparative study uses survey data from 191 Thai firms, measures validated in the study and structural equation modeling (SEM).
Findings
Extensive use of ABC for cost analysis, cost strategy and cost evaluation directly improves operational performance (OPP); it also indirectly improves financial performance (FP) through improving OPP. The results are similar for manufacturing and non-manufacturing firms and for large firms and small-medium enterprises (SMEs).
Research limitations/implications
Future studies could test the alternative models in other geographical and industrial contexts and could widen the range of control variables.
Practical implications
Monitoring of the effects of ABC use on OPP is crucial to achieving positive financial outcomes. The cross-functional nature of ABC is apparent; for it to be effective managers must ensure cooperation from departments and employees involved in the design and implementation of ABC systems.
Originality/value
This research arbitrates prior inconsistent findings by adopting an original approach of testing structurally different models in a single comparative study, using measures validated in the study. It provides new evidence that extends knowledge about impacts of ABC on OP. Further, it demonstrates its applicability in the context of developing economies.
Keywords
Citation
Vetchagool, W., Augustyn, M.M. and Tayles, M. (2020), "Impacts of activity-based costing on organizational performance: evidence from Thailand", Asian Review of Accounting, Vol. 28 No. 3, pp. 329-349. https://doi.org/10.1108/ARA-08-2018-0159
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited