To read this content please select one of the options below:

The importance of management control systems for startup funding – empirical evidence from external financiers

Hanna Schachel (Chair of Accounting and Management Control, Technische Universität Berlin, Berlin, Germany)
Maik Lachmann (Chair of Accounting and Management Control, Technische Universität Berlin, Berlin, Germany)
Christoph Endenich (Department of Accounting and Management Control, ESSEC Business School, Cergy-Pontoise Cedex, France)
Oliver Breucker (Chair of Accounting and Management Control, Technische Universität Berlin, Berlin, Germany)

Journal of Accounting & Organizational Change

ISSN: 1832-5912

Article publication date: 27 May 2021

Issue publication date: 27 October 2021

1035

Abstract

Purpose

This study aims to examine which categories of management control systems (MCSs) in startups are most important to external financiers. Furthermore, this paper investigates how equity and debt financiers differ in their perceptions of MCS categories and examines the relevance of MCSs for their investment decisions.

Design/methodology/approach

This study collects data through a cross-sectional survey sent to equity and debt financiers actively investing in startups. The results are based on survey responses from 73 financiers.

Findings

The results show that financial MCSs are considered most important, followed by strategic MCSs, while human resources MCSs are perceived as only moderately important. This paper finds significant differences in the perceived importance of MCS categories between equity and debt providers, which can be explained by differing risk profiles and monitoring needs. Although debt financiers consider financial and strategic MCSs to be less important for their portfolios’ startups than equity financiers do, debt financiers perceive MCSs as more important for their initial investment decisions.

Originality/value

The study sheds new light on the importance of different MCS categories in startups by analyzing external financiers’ perceptions. Overall, the empirical study provides insights that are particularly valuable for startups seeking external financing for company growth.

Keywords

Acknowledgements

We thank Antonio Dávila for helpful comments and suggestions. Furthermore, we thank Isabella Grabner and the participants of the Global Management Accounting Research Symposium (2018), Anja Schwering and the participants of the Annual Conference for Management Accounting Research (2018) and the participants of the Annual Meeting of the American Accounting Association (2018) for their helpful comments. Additionally, we would like to thank all responding financiers for their participation in our survey. Moreover, the authors appreciate the helpful comments and suggestions from the reviewers.

Citation

Schachel, H., Lachmann, M., Endenich, C. and Breucker, O. (2021), "The importance of management control systems for startup funding – empirical evidence from external financiers", Journal of Accounting & Organizational Change, Vol. 17 No. 5, pp. 660-685. https://doi.org/10.1108/JAOC-07-2020-0089

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

Related articles