Management accounting-strategy coalignment in Islamic banking

Abstract

Purpose

This paper aims to examine the effect of management accounting–strategy coalignment on the maqasid Shariah-based performance of Islamic banks in Indonesia. The study also examines the role of the corporate life cycle of Islamic banks in influencing the relationship between management accounting–strategy coalignment and performance.

Design/methodology/approach

Management accounting practices, management control systems, strategy and maqasid Shariah-based performance are measured using questionnaires which were distributed to 97 directors and heads of Islamic banks. The model of this study is analyzed using structural equation model.

Findings

This study finds that the coalignment between low cost-oriented strategy, strategic management accounting practices and mechanistic management control system has positive impact on improving maqasid Shariah-based performance. However, this study is unable to verify that corporate life cycle strengthens the positive relationship between management accounting–strategy coalignment and performance.

Research limitations/implications

Limited indicators of management accounting practices in this study illustrate less comprehensive management accounting practices. Further studies may add other relevant management accounting as described by the International Federation of Accounting Committee to provide a more comprehensive management accounting practices.

Practical implications

This study provides recommendations to the management of Islamic banks to design management accounting practices and management control systems that fit to their strategic orientation.

Originality/value

This paper fulfils limited empirical studies on management accounting practices and strategy in Islamic banking industry.

Citation

Laela, S.F., Rossieta, H., Wijanto, S.H. and Ismal, R. (2018), "Management accounting-strategy coalignment in Islamic banking", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 11 No. 4, pp. 667-694. https://doi.org/10.1108/IMEFM-04-2017-0088