UNIVERSITY OF GHANA THE PERCEPTIONS OF MANAGERS ON …

UNIVERSITY OF GHANA

THE PERCEPTIONS OF MANAGERS ON THE USEFULNESS OF ACCOUNTING

INFORMATION DURING THE DECISION-MAKING PROCESS

BY

HARRIET BORTELEY BOTCHWAY

(10700461)

THIS LONG EASSY IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN

PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER

OF SCIENCE IN ACCOUNTING AND FINANCE DEGREE

AUGUST, 2019

University of Ghana http://ugspace.ug.edu.gh

i

DECLARATION

I HARRIET BORTELEY BOTCHWAY do hereby declare that this work is the result of my own

research and has not been presented by anyone for any academic award in this or any other

university. All references used in the work have been fully acknowledged.

I bear sole responsibility for any shortcomings.

..................................................................

HARRIET BORTELEY BOTCHWAY

10700461

........................................................

DATE


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CERTIFICATION

I hereby certify that this long essay was supervised in accordance with the procedures laid down

by the University of Ghana.

..................................................................

DR. RITA AMOAH BEKOE

(SUPERVISOR)

........................................................

DATE


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DEDICATION

I dedicate this work to my dear parents, Mr. Emmanuel B. Bortey and Miss Mary A. Thompson. I

also dedicate this work to my Husband, Mr. Samuel N. Botchway and my lovely children for their

support.


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ACKNOWLEDGEMENT

First and foremost, I will like to express my profound gratitude to the Almighty God for giving me

good health and strength to complete this course successfully. May his name be praised. Amen

I wish to admit the immense contribution to my supervisor, Dr. Rita Amoah Bekoe of the

University of Ghana Business School for his patience, guidance and time in the course of this study

despite her tight schedules.

I again want to thank the management and staff of Ghana Heavy Equipment Limited for permiting

me to use their organization for my long essay and providing the necessary information needed to

make my work success.

I appreciate the contributions from all my friends, Nana Ama Otu-Ansah , P. K. Gadufia, my CEO

Yaw N. Ababio and my course mates who assisted me throughout the data collection.

I finally thank my families for their unflinching support and prayers who in diverse ways supported

me throughout my years in the university.

I love you all.


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TABLE OF CONTENTS

DECLARATION ............................................................................................................................. i

CERTIFICATION .......................................................................................................................... ii

DEDICATION ............................................................................................................................... iii

ACKNOWLEDGEMENT ............................................................................................................. iv

LIST OF FIGURES ....................................................................................................................... ix

ABSTRACT .................................................................................................................................... x

CHAPTER ONE ............................................................................................................................. 1

INTRODUCTION .......................................................................................................................... 1

1.0 Introduction ........................................................................................................................... 1

1.1 Background of the study ....................................................................................................... 1

1.2 Scope of the Study ................................................................................................................. 4

1.3 Problem Statement ................................................................................................................ 4

1.4 Research aim and Objectives ................................................................................................ 5

1.5 Research Questions ............................................................................................................... 6

1.6 Methodology and Data collection methods ........................................................................... 6

1.6.1 Method ............................................................................................................................ 6

1.6.2 Sources of data ................................................................................................................ 7

1.6.3 Sampling and selection criteria ....................................................................................... 7

1.7 Data analysis ......................................................................................................................... 8

1.8 Ethical considerations ........................................................................................................... 8

1.9 Organization of the study ...................................................................................................... 9

CHAPTER TWO .......................................................................................................................... 10

LITERATURE REVIEW ............................................................................................................. 10


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2.0 Introduction ......................................................................................................................... 10

2.1 Managerial Decision Making .............................................................................................. 10

2.2 Models of Decision Making ................................................................................................ 12

2.2.1 Rational Choice Theory ................................................................................................ 12

2.2.2 Bounded Rationality ..................................................................................................... 14

Heuristics ............................................................................................................................... 15

Reinforcement Learning ........................................................................................................ 15

2.3 Managerial Decision-Making Process ................................................................................ 16

2.3.1 The Managerial Decision-Making Process ................................................................... 17

2.4 Accounting .......................................................................................................................... 18

2.4.1 Accounting as a Source of Information ........................................................................ 19

2.4.2 Accounting Information ............................................................................................... 20

2.4.3 Financial Accounting Information ................................................................................ 21

2.4.4 Management Accounting Information .......................................................................... 21

2.5 Qualitative characteristics of Accounting Information ....................................................... 23

2.5.1 Fundamental qualitative characteristics ........................................................................ 23

Relevance ............................................................................................................................... 23

Faithful Representation .......................................................................................................... 23

2.5.2 Enhancing qualitative characteristics ........................................................................... 24

Accuracy ................................................................................................................................ 24

Timeliness .............................................................................................................................. 24

Comparability ........................................................................................................................ 24

2.6 Chapter Summary ................................................................................................................ 25

CHAPTER THREE ...................................................................................................................... 26

METHODOLOGY ....................................................................................................................... 26


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3.0 Introduction ......................................................................................................................... 26

3.1 Research design ................................................................................................................... 26

3.1.1 Research method ........................................................................................................... 27

3.1.2 Research approach ............................................................................................................ 28

Phenomenology ..................................................................................................................... 28

Ethnography ........................................................................................................................... 28

Grounded Theory ................................................................................................................... 29

Action Research Studies ........................................................................................................ 29

Case study method ................................................................................................................. 29

3.1.3 Ethical consideration .................................................................................................... 30

3.2 Data collection methods ...................................................................................................... 31

3.2.1 Data collection techniques ............................................................................................ 31

Participant Observation ......................................................................................................... 31

Face-to-face semi structured interviews ................................................................................ 32

3.2.2 Population ..................................................................................................................... 32

3.2.3 Sample and sampling techniques .................................................................................. 33

3.3 Data Analysis ...................................................................................................................... 33

Transcription of interview data .............................................................................................. 34

Condensation of data ............................................................................................................. 35

Coding data ............................................................................................................................ 35

Categorization of data ............................................................................................................ 36

3.4 Chapter summary ................................................................................................................ 36

CHAPTER FOUR ......................................................................................................................... 37

DATA ANALYSIS AND DISCUSSION OF FINDINGS ........................................................... 37

4.0 Introduction ......................................................................................................................... 37


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4.1 Usefulness of accounting information in stages of the decision-making process ............... 37

4.2 Roles of accounting information ......................................................................................... 40

4.2.1 Financial management .................................................................................................. 40

4.2.2 Investment decision making ......................................................................................... 41

4.2.3 Organizational growth .................................................................................................. 43

4.2.4 Performance evaluation ................................................................................................ 43

4.2.5 Organizational profitability and position ...................................................................... 44

4.3 Chapter summary ................................................................................................................ 45

CHAPTER FIVE .......................................................................................................................... 47

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ......................... 47

5.0 Introduction ......................................................................................................................... 47

5.1 Summary of key findings .................................................................................................... 47

5.1.1 Usefulness of accounting information in stages of the decision-making process ........ 47

5.1.2 Financial management .................................................................................................. 48

5.1.3 Investment decision making ......................................................................................... 48

5.1.4 Organizational growth .................................................................................................. 48

5.1.5 Performance evaluation ................................................................................................ 49

5.1.6 Organizational profitability and position ...................................................................... 49

5.2 Conclusion ........................................................................................................................... 50

5.3 Limitations and recommendations for future research ........................................................ 50

REFERENCES ............................................................................................................................. 51

APPENDIX ................................................................................................................................... 56

Interview Schedule .................................................................................................................... 57


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LIST OF FIGURES

Figure 2.1. The managerial decision-making process, Harrision (1995) ...................................... 17

Figure 2.2 Accounting Information for Decision Making, Galbreath et al., (2012) .................... 19


x

ABSTRACT

Managerial decision making requires quality, relevant, reliable and accurate accounting

information. Accounting information plays a decision-facilitating role since it possesses value-

relevance capabilities to enhance decision making. Through the use of accounting information,

managers are enabled to ascertain the meaning and significance of day-to-day activities of an

entity. In this regard, the aim of this study is to examine the perceptions of managers on the

usefulness of accounting information during decision-making process.

The study employs the qualitative research method. This method aids discovering meanings that

people attribute to events they experience. The study investigates the perceptions and views of

respondents on the usefulness of accounting information in the decision-making process. In doing

so, the study locates meanings that managers confer on the subject matter.

The study finds that managers find accounting information useful in various stages of the decision-

making process. The study indicates that usefulness of accounting information in decision making

is influenced by the roles of accounting information in financial management, investment decision

making, organizational growth, performance evaluation and determination of organizational

profitability and position.

The study recommends that participant observation or ethnography should be used by researchers

for further studies in order to critically assess how managers engage with accounting information

in the decision-making process.


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CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter provides an introduction to the study. It discusses background of the study, scope of

the study and problem statement. The chapter also presents the research aim and objectives,

research question, methodology and data collection methods, ethical considerations and

organization of the study. These sections are discussed in turn hereafter.

1.1 Background of the study

Organizational success is ultimately determined by managerial roles including decision making.

The essentiality of decision making through a rigorous decision-making process cannot be

undermined by managers. As a result, the ability of managers to utilize available information,

especially accounting information to aid decision making is important. Primarily, accounting

information is to assist managers and owners of businesses with decision-making (Halabi &

Carroll, 2015). Hence, the role of accounting information in an organizational context is crucial

albeit prior studies have not solely considered the use of accounting information in the decision-

making process and its application in wider organizational setting (Hall, 2009). Evidently,

accounting information plays a decision-facilitating role in the form of periodic financial reports

or analysis of these reports which are sources of accounting information (Sprinkle, 2003;

Horngren, et al., 2005). The provision of accounting information and the consideration of its

characteristics such as relevance, understandability, reliability, timeliness, accuracy and

comparability improve managers knowledge and their ability to make better decisions (Sprinkle,

2003). Managers are faced with a portfolio of organizational problems and need information to


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develop knowledge of the business environment. Due to this, information to be used by

management must possess value-relevance capable of enhancing decision making (Ragab &

Omran, 2006). In Beaver’s (1989) understanding, the main objective of accounting information is

to help its users to make informed decisions.

Accounting provides vital information regarding organizational performance. Relatedly,

accounting information highlights daily activities while providing detailed checks on performance

to assist managers assess organizational performance (Simon, et al., 1954). Managers responsible

for project management usually find accounting information about budgeted cost versus actual

cost very crucial to determine unprofitable projects (Van der Veeken & Wouters, 2002). According

to McKinnon & Bruns (1992), accounting information can also be used by managers to ascertain

the meaning and significance of day-to-day management activities. Drawing on Biddle & Hilary’s

(2006) study, provision of quality accounting information reduces information assymetry between

managers and providers of capital. Accounting information also plays the role of enhancing

internal decision-making efficiency. In this regard, the role of accounting information extends

beyond its utilization by managers to make decisions to monitoring of the effectiveness of the

decisions made. In essence, accounting information enables organizational transparency thereby

enhancing monitoring of opportunistic behavior of management while encouraging decision

making (Zhai & Wang, 2016).

Historically, the two major divisions of accounting information namely financial accounting and

management accounting information have been given much attention with management

accounting information closely associated with management (Jonsson, Relate management

accounting research to managerial work!, 1998). Notably, much research in management


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accounting has been focused on the use of accounting information in clearly distinguishable

decision-making scenarios (Hall, 2009). Besides, historical financial accounting information

composed of financial statements such as corporate annual reports and other books of account

complement development of management knowledge for strategic decision making. Accounting

information can be viewed as a private asset to an organization necessary for decision making.

Despite the aforementioned, accounting information may focus on historical financial accounting

information (Hassan & Power, 2009). Evidently, accounting data constitutes valuable information

for judging the value of an organization (Zhai & Wang, 2016). In a ground-breaking paper, Ohlson

(2005) built a model to establish the relationship between accounting information and the value of

an organization. Contemporary discussions emphasize the importance of accounting information

to management.

Undoubtedly, managers do make decisions. However, empirical investigations aimed at examining

what managers actually do indicate that decision-making can be a relatively small part of

managerial roles (Whiteley, 1985; Hales, 1986; Mintzberg, 1973; Stewart, 1988). Managerial roles

comprise addressing risks and business environment challenges such as uncertainty, market

turbulence, and the likelihood for significant errors (Isenberg, 1984; Kotter, 1982; Landau & Stout,

1979). As such, managers’ understanding of these challenges through the availability of relevant

information is essential. Existing literature highlight the relevance of accounting disclosures to

provide quality information beneficial to managers and other stakeholders. Disclosure of high-

quality accounting information optimizes managerial investment decision making, improves

resource allocation efficiency and ensures more returns to investors (Bushman & Smith, 2003).


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There exists much to be investigated concerning what managers actually use accounting

information for since studies have not fully assessed how managers use accounting information in

their managerial work. The scanty literature is dominated by relevance of accounting information

to multiple stakeholders but this study is designed to fill the gap by examining the perceptions of

managers on the usefulness of accounting information during decision making in the Ghanaian

context. There is therefore the need to examine how managers engage with accounting information

as an input in the decision-making process.

1.2 Scope of the Study

The scope of this study will consider Ghana Heavy Equipment Limited (GHEL). Ghana Heavy

Equipment Limited is a limited liability company wholly owned by the Government of Ghana

which specializes in the repairs and servicing of heavy farm machinery and implements such as

tractors. Activities of the company include sales and servicing of earth-moving equipment and

agricultural machinery which spans over three decades. GHEL has long serving managers who

can provide rich information about the subject matter which will be subjected to analysis thereafter.

1.3 Problem Statement

Despite management accounting information closely linked to managerial decision-making, much

is still to be learned about the usefulness of accounting information in managerial decisions (Hall,

2009). For what purposes do managers use accounting sources of information and in what specific

decision-making setting? How do managers exactly use accounting information in deliberative

discourse with other organizational members? With other numerous sources of information, what

are the specific features of accounting information that are useful to decision making?


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Despite Jonsson’s (1998) unrelenting arguments that management accounting information should

be associated with managerial work, a few studies have been directed towards understanding how

managers interact with accounting information to generate meaningfulness. The focus of much

management accounting research has examined how managers use accounting information in

particular organizational instances (Hall, 2009). Besides, how managers use accounting

information in specific organizational scenarios is restrictive since there are alternative uses of

accounting information for managers in the decision-making process. Previous studies have

devoted less attention to the detailed use of accounting information by managers (Hoopwood,

1989; Hall, 2009; Ahrens & Chapman, 2007).

This study, therefore, attempts to uncover how managers engage with accounting information

during the decision-making process and how managers perceive the usefulness of such information

in making organizational decisions.

1.4 Research aim and Objectives

The aim of this study is to examine the perceptions of managers on the usefulness of accounting

information during decision making. In order to achieve this aim, the following objectives will be

considered;

1. To examine the contribution of accounting information to managers’ decision

making.

2. To assess the components of accounting information and their relevance.

3. To examine the decision-making process at the managerial level and the role of

accounting information in its effectiveness.


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The succeeding section outlines the research questions that will enable the researcher achieve these

objectives.

1.5 Research Questions

The researcher hopes to elicit verbal responses from participants of the study by posing the

following questions:

1. What is accounting information and what are the sources of accounting information?

2. Under what circumstances do managers use accounting information? Why?

3. With other sources of information available, what is it about accounting information that

managers find helpful?

4. At what point of decision making is accounting information relevant?

5. What are the components of decision making and structures for implementation of

decisions?

6. How does accounting information aid the decision-making process?

These questions are guided by the researcher’s method to carry out the study. The research

methodology and data collection and analysis are discussed in turn hereafter.

1.6 Methodology and Data collection methods

1.6.1 Method

This study is designed to investigate the perceptions of managers on the usefulness of accounting

information during the decision-making process. Evidently, the research methodology is

determined by the nature of the research question and subject matter to be investigated (Denzin &


7

Lincoln, 2005). Due to this, the research format aims at answering the research questions and

achieving the study’s objectives. The researcher’s focus is to explore the interpretations and

meanings ascribed to the subject matter by managers to enhance understanding of the subject

matter in a particular context, hence qualitative methodology is most apposite. Qualitative research

methodology involves an interpretative and naturalistic approach to a subject matter (Denzin &

Lincoln, 2005). The exploratory nature of qualitative research will enable the researcher to

describe experiences of participants of the research to understand the meaning attached to

managers’ perception on accounting information and its usefulness to decision making.

1.6.2 Sources of data

The data collection techniques are dependent on the research method adopted by the researcher,

availability of data and research topic (Myers, 2013). Data will be collected from managers at

Ghana Heavy Equipment Limited using face-to-face semi structured interviews. This will enable

the researcher to determine the construction of meanings that are attached to the subject matter in

its natural setting (Cohen, et al., 2007). Besides, the researcher will be able to probe more into

open-ended questions. Interviews will serve as a source of primary data while secondary data will

be gathered from publicly available documents such as management reports and minutes from

management meetings to aid triangulation. Triangulation involves using multiple data sources in

an investigation to produce a rich understanding of the subject being studied.

1.6.3 Sampling and selection criteria

A sample represents the participants that will be selected by the researcher for the study. In

qualitative research, small samples are used and studied in their context to gain a deeper


8

understanding of the subject matter (Miles, Huberman, & Saldana, 2014). They maintained that

qualitative samples tend to be purposive rather than random. Hence, the study seeks to consider a

sample of ten (10) managers at Ghana Heavy Equipment Limited (GHEL) to gather data. This

sample is selected because these managers are deemed knowledgeable and experienced with

regards to the use of accounting information in making decisions. Besides, they will provide an in-

depth and rich insight into the relevance of accounting information to decision making.

1.7 Data analysis

Qualitative analysis of data is the process of making sense from research participants’ views and

opinions of situations, corresponding patterns, themes categories and regular similarities (Cohen,

et al., 2007). Analysis of data is crucial since it reduces raw information, separates significant

materials from trivia and identifies an apposite medium for communicating the essence of what

the data reveals (Patton, 2002). The researcher will adopt thematic analysis to identify, analyze

and report patterns (themes) within the data collected. Using thematic analysis, the researcher will

transcribe interview data, reflect on the data for patterns, categories, regularities and threads to

emerge inductively (coding), organize excerpts or codes into themes, review these themes and

produce a report (Braun & Clarke, 2006).

1.8 Ethical considerations

The principal methods to collect data comprise interviews and use of publicly available documents.

Confidentiality of these information will highly be maintained. Any information given to the

researcher will be kept confidential and will not be used for any other purpose than the one

requested for (purely research). Participants or respondents of the study will not be coerced or be


9

under any form of duress or undue influence as well. Again, respondents will be allowed to

withdraw from any interview session; before or during the session.

1.9 Organization of the study

The study was grouped into five chapters. Chapter one presented the background of the usefulness

of accounting information in the decision-making process; scope of the study; problem statement;

research aim and objectives; research questions; brief overview of methodology and data

collection methods; ethical considerations and organization of the study. Chapter two reviews

empirical literature on the research subject. Chapter three considers the methodology including

research method, research approach, data collection methods and data analysis. Chapter four

presents discussions on data gathered and findings. Finally, chapter five comprises summary of

findings, conclusion and recommendations for further studies.


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CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter discusses strategic managerial decision making with a focus on the usefulness of

accounting information in the decision-making process as highlighted in scholarly discussions.

The researcher draws on discussions of strategic decision making and accounting information by

other authors in the literature of managerial decision making. The chapter also provides an

anatomy of accounting information and its usefulness to managerial decision making. This chapter,

therefore, comprise the succeeding sections:

• Managerial decision-making;

• Models of decision making;

• Managerial decision-making process;

• Accounting;

• Accounting as a source of information;

• Accounting information; and

• Chapter summary.

These sections are discussed in turn in the following sections

2.1 Managerial Decision Making

In defining managerial decision making, it is customary for the focus to be drawn to a decision-

making process or decision itself. It is useful to consider definitions for the term decision. A


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decision can be defined as a judgement concerning what an entity ought to do in certain

circumstances after reflecting on some alternative courses of action (Ofstad, 1961). Inferentially,

decisions are made with the consideration of certain processes driven by deliberations on

alternative possible courses of action. In the understanding of Herbert A. Simon, decisions are

made through three principal phases, namely; “finding occasions for making a decision; finding

possible courses of action; and choosing among courses of action” (Simon, 1960, p. 1). Another

definition avers that a decision is an intellectual process of differentiating among alternatives. In

this instance, the decision enables the decision maker to choose a preferred purpose, associated

tasks and reasonable goal-oriented statements (Emory, 1968). A decision can also be viewed as a

comparison between alternatives and evaluation of possible outcomes (Harrision, 1995). Harrision

(1995) further expounded that,

“a decision is defined as a moment, in an ongoing process of evaluating alternatives for

meeting an objective, at which expectations about a particular course of action impel a

decision maker to select that course of action most likely to result in attaining the

objective” p. 4.

Hence, managerial decision making occurs within identifiable decision-making functions.

Decision making is a significant activity at all levels in all types of organizations. Managerial

decision making is also an important executive task since only executives make such decisions

(Drucker, 1967). Though managers engage in other activities, the act of making decision is without

equal in importance (Harrision, 1995). It is worth noting, that strategic decisions determine

managerial decisions at every unit throughout an organization. Notably, if strategic decisions made

by top management are ineffective, then managerial decision making will adversely be affected.


12

Therefore, effective strategic choices by top management will positively influence managerial

decisions.

Strategic decisions are fraught with complexities and dynamic variables. Harrision (1995)

intimated that the overarching feature of strategic decisions is their significance. He outlined the

following five criteria as major indicators of strategic decisions, namely:

• The decision must define the organization’s relationship with the external environment;

• The decision must consider the organization as the unit of analysis;

• The decision must encapsulate major organizational functions;

• The decision must outline guidance for all administrative and operational activities; and

• The decision must affect the long-term success of the organization.

2.2 Models of Decision Making

This section discusses the theoretical underpinnings of decision making in the literature. The

literature identifies rational choice theory and bounded rationality theory as two important

theoretical frameworks that explicate how decisions are made by organizational actors.

2.2.1 Rational Choice Theory

Rational Choice Theory traces its origins to neoclassical economic theorists, rational choice

sociologists and economic organizational theorists (Green & Shapiro, 1994; Coleman, 1990;

Elster, 1986). This theory is premised on self-interested actors or individuals who engage in utility

maximizing actions and are unconstrained by social norms and practices of others (Coleman,

1990). Similarly, Dooluin (1990, p. 5) posited that,


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“the rational choice model of decision making is derived from the neoclassical economics

assumption of a rational, completely informed, maximizing, individual decision maker”.

Decision making according to rational choice theory involves a series of analytical procedures

(Harrision, 1995; Doolin, 1990). The first consist of the identification of alternative choices

through a search process. This is followed by an examination of various possible courses of action

before a selection of an alternative that maximizes the achievement of objectives is made from

various courses of action (Doolin, 1990).

According to Green & Shapiro (1994), rational choice theory is underpinned by the following

assumptions:

• actors possess complete information and knowledge of their tastes, available resources and

market conditions;

• actors estimate changing market conditions;

• preferences of actors remain reasonably stable and are not subject to erratic changes;

• actors are not irrational, emotional, impulsive or habitual in making utility maximizing

choices.

Rational choice theory, therefore, becomes axiomatic in nature and attempts to provide a basis for

making decisions by individuals (Coleman, 1990). The axioms of rational choice theory explicate

what is deemed “rational choice” by comparing pairs of alternatives which meet the objectives of

the decision maker. The rational actor chooses the action that maximizes outcomes of decisions

given his rationally formed expectations (Dijkstra & Andreas, 2015).

Over the past decade, the rational theory has come under a wide range of criticism for its

“unrealistic assumptions and lack of empirical testing and limited empirical validity” (Buskens,


14

2015, p. 1). Moreover, the rational choice theory has refutable consequences of actions since any

choice can be rationalized with the consideration of a convenient objective. It is also silent on what

goes into how actors find the utility maximizing course of action (Dijkstra & Andreas, 2015).

Consequently, the rational choice theory has been extended at both the macro and micro levels.

Wittek, Snijders, & Nee (2013) intimated that contemporary theories on the rational behavior

augment the rational choice theory. At the macro level, the theory has been extended to broaden

the assumption of interactions in a perfect market where actors have complete information to

enable more complex interaction structures in which the assumption of access to complete

information by actors is relaxed. At the micro level, assumptions about the rationality and

selfishness of actors have been relaxed. The extension of the rational choice theory led to the

bounded rationality theory which is discussed in the next section.

2.2.2 Bounded Rationality

Managerial decision making can be regarded as rational on the basis of the way in which it was

chosen (procedural rationality) or on the outcomes of the decision (substantive rationality)

(Dijkstra & Andreas, 2015). Unlike rational behavior which seeks to maximize utility among

alternatives that are objectively available, bounded rational behavior selects “some some actions

from those that memory, observation and thought bring to attention” (Wright, 2015, p. 907).

Bounded rationality is therefore aimed at satisficing wants and needs rather than maximization of

utility (Conlisk, 1996). The bounded rationality theory considers what goes into the decision

making process that lead to making a choice and human cognitive limitations and social influences

(Wright, 2015). The bounded rationality theory focuses on on two important classes of models,

namely heuristics and learning processes.


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Heuristics

Heuristics encompass the mental rules utilized by decision makers to choose an action from a set

of alternatives (Wright, 2015). In general, heuristics deviate from the norm of optimizing utility

whereby decision makers are not assumed to gather complete information about all available

alternatives before making a decision. Heuristics, therefore, become adaptive rules because they

are not only in accord with mental rules or human cognition but also the structure of information

in a given environment (Gigerenzer & Selten, 2001).

Reinforcement Learning

A common approach to learning is reinforcement (Wright, 2015). For instance, if an action is

associated with the most favorable outcome, it is more likely for a decision maker to repeat such

an action. In the case where this is not so, alternative possible courses of action that enable the

achievement of decision making goals will be explored thoroughly. According to Macy, Benard,

& Flache (2013), learning to inform the decision making process is informed by three behavioral

assumptions.

First, decision makers consider the likely consequences of alternative possible courses of actions

and tend to be associated more with the actions with better outcomes. However, the outcomes that

guide the decision maker in this instance are those that have been experienced and not those that a

rational actor may envision to occur based on logical reasoning.


16

Second, decisions are driven by two cognitive mechanisms known as rewards and punishment.

The effect of an outcome may, therefore, be evaluated by the decision maker as satisfactory or

unsatisfactory, gain or lose or pleasant or repelling.

Third, reinforcement learning considers satisficing, similar to making decisions on the basis of

heuristics. Choices that have satisfactory outcomes are more likely to be considered whereas

unsatisfactory outcomes induce searching for alternative possible courses of action. This includes

the tendency to revisit alternative possible courses of action whose outcomes are even worse, a

practice known as ‘dissatisficing’ (Macy et al., 2013).

The theory of reinforcement learning is seen to be the most elementary theory of bounded

rationality (Wright, 2015). Other sophisticated models of learning behavior emphasize that the

principle of optimizing outcomes is based on experience rather than anticipation.

2.3 Managerial Decision-Making Process

Over the past decades, there has been more emphasis on integrated managerial decision making

processes (Witte, 1972; Schrenk, 1969; Janis, 1968; Fredrickson, 1971). This view holds that

managerial decisions should be the outcome of a set of decision-making activities connected to

constitute a managerial decision-making process (Harrision, 1995). The following diagram depicts

the integrated managerial decision-making process,


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2.3.1 The Managerial Decision-Making Process

Figure 2.1. The managerial decision-making process, Harrision (1995)

According to Harrision (1995), the components of the managerial decision-making process are the

decision-making functions. These functions are explained briefly as follows;

• Setting managerial objectives. Managerial decisions begin with setting objectives that

enables performance of associated tasks to achieve objectives that gave rise to them.

• Searching for alternatives. Searching for alternatives includes gathering relevant internal

and external sources of information to design a set of alternatives that will ensure the

successful achievement of objectives.

• Comparing and evaluating alternatives. This function of the decision-making process

compares alternatives to establish possible relationships and preferences that lead to

successful outcomes.


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• The act of choice. This is when the decision maker chooses from among a set of alternative

courses of actions.

• Implementing decisions. Implementation decisions comprise activities that the chosen

course of action into reality.

• Follow-up and control. This managerial decision function ensures that the implemented

decision has outcomes consistent with the objectives that gave rise to it.

Managerial decision-making process involves variables that aid selection of the best possible

course of action. One of these variables that plays a crucial role in the decision-making process is

accounting information. Accounting information as a useful decision-making asset is discussed

hereafter.

2.4 Accounting

In 1996, the American Accounting Association defines accounting as “the process of identifying,

measuring and communicating economic information to permit informed judgements and

decisions by users of the information” (American Accounting Association, 1966, p. 2). Similarly,

the American Institute of Certified Public Accountants (AICPA) maintained that accounting is the

art of recording, classifying and summarizing transactions and events, and interpreting financial

results thereof (American Institute of Certified Public Accountants, 1941). These definitions of

accounting emphasize that accounting is a discipline with well-equipped techniques and methods

that measure transactions in monetary terms. Relatedly, accounting serves as a source of valuable

information that communicates an organization’s performance and financial position.


19

Accounting can also be conceptualized as a system or process that identifies, measures and records

financial events, analyzes them and presents reports of financial result to intended users such as

managers, customers, employees or creditors. Historically, accounting was confined to the

provision of financial information function. However, rapid changes in the business arena in recent

times have widened the scope of accounting into new growth areas such as environmental

accounting, forensic accounting, tax accounting, financial accounting and management accounting

among others. This development came about due to the ability of accounting to provide the kind

of information that managers and other users of accounting information need for decision making.

2.4.1 Accounting as a Source of Information

Accounting consists of systems or interlinked processes that communicate accounting information

resulting from economic events to internal and external users for the purpose of making decisions.

The accounting process links accounting information with economic activities which are

communicated to decision makers as can be seen below in Fig. 2.

Figure 2.2 Accounting Information for Decision Making, Galbreath et al., (2012)

TheAccountingProcess

AccountingInformation

DecisionMakers(InternalandExternal)

EconomicActivities


20

Galbreath et al., (2012) further emphasized that the accounting process or system involves

personnel, procedures, technology and records used to develop accounting information and to

communicate the information to decision makers. Managers, therefore, draw on accounting

information to make meaningful decisions that affect economic activities of an organization.

2.4.2 Accounting Information

Accounting information classifies, summarizes, communicates and interprets financial

information to be used by its intended users to make decisions. According to the National Council

of Educational Research and Training (NCERT), the objectives of accounting information include:

• Provision of information for economic decisions;

• Provision of information useful for predicting and evaluating uncertainty in cash flows;

• Provision of information for judging management’s ability to utilize economic resources

effectively and efficiently;

• Provision of interpretive and factual information while disclosing underlying assumptions;

and

• Provision of information on activities that affects the society.

Broadly, accounting information is categorized into financial and management accounting

information. Both of these sources of information are presented in a quantitative manner with

certain qualitative features. These are discussed in the next sections.


21

2.4.3 Financial Accounting Information

Financial accounting information reflects an organization’s financial performance and position for

a period of time. It shows the use of economic resources and other claims obtained from investors

and creditors in generating net cash flows (Deloitte, 2018). Principal sources of financial

accounting information usually provided for external users include financial statements such as

income statement, statement of financial position, statement of cash flows and statement of

changes in equity (Galbreath et al., 2012). The International Accounting Standards Board (IASB)

developed a framework to assist preparers of financial information to develop consistent

accounting policies for areas that are not covered by the International Accounting Standards (IAS)

and International Financial Reporting Standards (IFRS). The IAS and IFRS issued by the IASB

regulates the preparation and presentation of financial statements that are published by

organizations for the consumption of external users (International Accounting Standards Board,

1989). Thus, the primary purpose of financial accounting information is to assess an organization’s

prospects for future net cash inflows and how management discharges its stewardship

responsibility by using available resources efficiently and effectively (Deloitte, 2018).

2.4.4 Management Accounting Information

In every organization, the accounting system focuses attention on providing management with

relevant information for decision making, planning, controlling and directing is management

accounting (Hopper et al., 2007). Notably, management accounting grew from cost accounting to

expand the horizon of information available to managers for decision making (Roberts, 1989).

Consequently, provision of adequate management accounting information will aid planning,

control and performance measurement which will significantly influence managerial decision


22

making. Porter (1986) argued that management information must possess a strategic orientation

that is future-oriented and externally focused. Therefore, management accounting must adopt

techniques with the following orientations:

• Environmental (outward-looking or long term); and

• Market focus.

Guilding et al., (2000); and Fowzia (2011) classified these techniques that ensure the provision of

useful management accounting information into five classes, namely: costing techniques, strategic

decision making; competitor accounting; customer accounting; and planning, control and

perfomance measurement.

Costing techniques provide information using activity-based costing, target costing, life-cycle

costing, quality costing and value chain costing. Strategic decision making techniques focus on

strategic costing, strategic pricing and brand valuation (Shank & Govindarajan, 1992). Competitor

accounting techiques comprise competitor cost assessment, competitive position monitoring and

competitor performance appraisal based on published financial statements (Adigbole, Osemene,

& Fakile, 2019; Ward, 1992). The customer accounting technique is characterized by customer

profitability analysis while the last techique, planning, control and performance measurement

adopts bench-marking and integrated performance measurement techniques (Kaplan & Norton,

2000; Nixon & Burns, 2012). Following the abovementioned, these techniques provide rich

sources of accounting information for managerial decision-making.


23

2.5 Qualitative characteristics of Accounting Information

Qualitative characteristics of accounting information highlight the information sources that are

useful for making decisions by users. These qualitative characteristics are important to general

purpose financial statements for external users and management or costing techniques for

managerial decision-making. These qualitative characteristics are discussed in the following

according to the International Accounting Standards Board’s (1989) conceptual framework. The

conceptual framework divides these qualitative characteristics into fundamental and enhancing

qualitative characteristics.

2.5.1 Fundamental qualitative characteristics

Relevance

Accounting information is said to be relevant if it is capable of affecting the decisions made by its

intended users. In doing so, accounting information will make a difference in decisions on the

basis of its predictive value, confirmatory value or both (ACCA, 2018). Accounting information

is particularly relevant to managers if it has predictive value that predicts future costs and revenues

among courses of actions. Historical information may not necessarily be relevant in making future

decisions. The expected future cash flows from alternatives will be used in selecting a suitable

alternative (Galbreath et al., 2012).

Faithful Representation

Under this fundamental qualitative feature, accounting information is faithfully represented when

it is presented in accordance with the substance and economic reality of financial transactions and

not only their legal form. For accounting information to faithfully represent economic or financial

transactions, there should be completeness and neutrality of information as well as information


24

free from errors (ACCA, 2018). For accounting information to be complete, it must contain all

necessary descriptions and explications of financial transactions. Besides, accounting information

is said to be neutral when it is free from bias. Also, accounting information should be free from

material errors or omissions that make information misleading and unreliable

2.5.2 Enhancing qualitative characteristics

Accuracy

Accuracy of accounting information ensures its preciseness to aid decision making. Accurate

information bearing both qualitative and quantitative features provides management with precise

measurement of events in monetary terms.

Timeliness

Timeliness means that accounting information must be provided to decision-makers in time in

order to influence their decisions. Timely provision of accounting information aids the adoption

of appropriate techniques to achieve organizational goals.

Comparability

Accounting information is more useful if it can be compared to similar information for another

period. Comparability enables users of accounting information to identify and understand

similarities and differences among financial events.


25

2.6 Chapter Summary

The chapter discussed managerial decision-making and presented the stages or functions in the

decision-making process. Emphasis was placed on discussions on the managerial decision making

in literature. This was followed with the discussion of accounting as a discipline and accounting

information which constitutes an outcome of accounting processes. The two main categorizes of

accounting information, thus, financial accounting information and management accounting

information were discussed next. Also, some qualitative characteristics of accounting information

were presented to climax the discussion on the usefulness of accounting information in managerial

decision-making.


26

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This section describes the tools, methods and procedures that the researcher will employ to achieve

the research objectives. The research methodology also details the systematic steps that will be

undertaken by the researcher to address research questions. This section, therefore, discusses the

research design comprising research method, approach and ethical consideration, data collection

methods and modes of data analysis of the study. Sub-sections that are deemed necessary by the

researcher will be created to further expound on methods and techniques that will be adopted.

These sections are discussed in turn as follows.

3.1 Research design

The research design details the researcher’s plan in answering research questions that will emerge

and achieving overall objectives of the research. In the understanding of Leedy (1997, p. 195), a

research design is best described as;

“a plan for a study, providing the overall framework for collecting data”.

Similarly, it serves as a structure that will aid the execution of the entire study. The researcher will

adopt the interpretive paradigm since the research design process begins with philosophical

assumptions that are required to carry out the study (Creswell, 2007). The interpretive paradigm

will enable the researcher to observe and gain a rich understanding of the perception of managers

on the usefulness of accounting information during decision making. This will also allow the

researcher to examine the subjective perceptions of managers.


27

Notably, the research design embodies the research method, research approach and ethical

considerations. These are discussed in the succeeding sections.

3.1.1 Research method

The research method is generally the researcher’s tool that will be utilized to conduct this study.

The study will adopt qualitative research method to achieve its objectives. The qualitative method

is adopted for this study because it does not limit the scope and nature of responses that will be

elicited from participants to highlight managers’ perceptions about accounting information when

making decisions. Besides, it is a model occurring in a natural setting that will enable the researcher

to develop a level of detail from high involvement in the actual experience (Creswell, 2007).

Qualitative research method or inquiry also encourages;

“discovery, insight and understanding from the perspective of those being studied”

(Merriam, 1998, p.1).

The qualitative method enabled the researcher to discover meaning that managers ascribe to the

usefulness of accounting information during the decision-making process in their natural settings

of an organization (Bodgan & Biklen, 2003; Denzin & Lincoln, 2000). Corroboratively, qualitative

research method is most appropriate for locating meanings that people place on events, structures

and processes as well as their perceptions, prejudgements, assumptions and presuppositions (Miles

& Huberman, 1994). The qualitative nature of the study enables an inductive approach to be

adopted which attempts to gain a deeper understanding of the meanings that managers attach to

the relevance of accounting information in the decision-making process (Saunders et al., 2009).

Qualitative research is flexible enough to allow the research design to be modified to a large extent


28

Invalid source specified..

The subject of the study requires acquisition of adequate information pertaining to the perception

of managers and it is apposite to use a qualitative method to provide a deeper understanding of

how managers perceive the usefulness of accounting information in decision making. This will

ultimately capture the subjective views of these managers.

3.1.2 Research approach

There are five approaches to qualitative inquiry, namely; phenomenology, ethnography, grounded

theory, action research studies and case study (Creswell, 2007, p. 5). The researcher’s aim to

examine the perception of managers on the usefulness of accounting information during decision

making makes case study the appropriate research approach to be adopted for this study.

Phenomenology

Phenomenology refers to how human actors attempt to make meaning of real world (Saunders et

al., 2009). This qualitative method allows actors to examine their lived experiences and through

these experiences, studies are conducted into areas of little knowledge Invalid source specified..

Ethnography

Ethnography is a qualitative inquiry approach that enables a researcher to describe and interpret

both shared and learned patterns of behaviors, values and beliefs of a group (Creswell, 2007). It

provides an in-depth and analytical description of a cultural phenomenon (Borg & Gall, 1989). An

ethnographic study enables the researcher to be immersed in a setting and becomes part of a group


29

to gain a deeper understanding of the meanings and significance that the group places on their

behavior and that of others (Smith et al., 1994).

Grounded Theory

Grounded theory enables the prediction and explanation of human behavior that inform how

theories are developed (Saunders et al., 2009). This qualitative method aims at developing theories

through careful observation and reflection of empirical material collected for a study (Saunders et

al., 2009).

Action Research Studies

Action research studies is primarily focused on action as indicated by Saunders et al. (2009). More

specifically, it is aimed at driving organizational change and thus, appopriate for addressing “how”

questions (Saunders et al., 2009). Action research studies considers the collaboration of researchers

and practitioners with the the researcher often being part of an organization. This method can also

be iterative in nature with a focus on diagnosing, planning, execution and evaluation of

organizational processes (Saunders et al., 2009). It also emphasizes the need for the study to have

implications that enables other contexts to inform the results of the research.

Case study method

This study employs the case study method to achieve its research objectives. The case study

method to qualitative research inquiry is an;


30

“empirical inquiry that investigates a contemporary phenomenon within its real-life

context; when the boundaries between phenomenon and context are not clearly evident;

and in which multiple sources of evidence are used” (Yin, 1984, p. 23).

The case study approach uses empirical evidence for people in real-life settings (Myers, 2013).

Again, case study will enable the researcher to examine the phenomenon of managerial decision

making in its real-life context (Yin, 2016). As a result, using the case study method will enable the

researcher to examine managers’ views on the usefulness of accounting information in their real-

life context of organizational decision making.

Qualitative case study will enable the researcher understand why and how decisions are made and;

how and why the decision-making process works the way it does. Besides, the study seeks to gather

evidence of decision-making process and managers’ views on the usefulness of accounting

information in decision making.

3.1.3 Ethical consideration

Ethical considerations are pre-requisite in the lives of researchers and require researchers to protect

the dignity of their respondents and publish well the data that will be gathered (Mantzorou &

Fouka, 2011). The following ethical considerations will be considered for this study;

• Participants or respondents of the study will not be coerced or be under any form of duress

or undue influence.

• The names and personal details of respondents will not be included in the study.

• The researcher will ensure confidentiality of all information provided by respondents.


31

• Respondents will also be allowed to withdraw from any interview session; before or during

the session.

3.2 Data collection methods

Data collection is necessary to achieve the study’s objectives. The researcher will choose from a

population, an appropriate sample to collect the required information for the study. As a result,

this section will comprise data collection techniques, population and sample and sampling

technique to be adopted to collect data that will aid the researcher’s analysis.

3.2.1 Data collection techniques

The data collection techniques to be employed by the researcher are dependent on the research

method, availability of data and research topic (Myers, 2013). For the purpose of qualitative

research, this study will gather relevant data through participant observation and face-to-face semi

structured interviews.

Participant Observation

Participant observation is one of the major techniques used in ethnographic research (Skager &

Weinberg, 1971). They averred that participant observation introduces flexibility to the study since

the researcher can adapt to changing situations as the study proceeds. Participant observation is

also apposite in gaining a deeper understanding of real life situations Invalid source specified..

Understanding the usefulness of accounting information in the decision-making process demands

the researcher to allow participants of the study to define the setting and proffer their views which

can only be known when the researcher’s investigation commences (Bodgan & Biklen, 2003).


32

Additionally, participant observation enables the researcher or observer to become part of the

subject being observed so the researcher can provide insider information and opinions. This is

essential because views from organizational members who are not managers may differ from the

views of managers.

Face-to-face semi structured interviews

An interview is a two-party conversation between an interviewer and interviewee to gather data as

specified by the objectives of a study (Cannel & Kahn, 1968). Interview is essential to determine

the construction of meanings that are attached to a phenomenon in its natural setting (Cohen et al.,

2007).

Interview are categorized into structured interview, semi-structured interview and unstructured

interview. The researcher will employ semi-structured interview because it will enable the

researcher to word questions carefully and probe more into open-ended questions. Interviews will

be tape recorded where allowed by respondents to aid its transcription to initiate the data analysis

process (Miles, et al., 2014).

3.2.2 Population

A population is a group of individuals or objects that have the same form of characteristics

(Mugenda & Mugenda, 2013). Besides, the researcher’s specifications for choosing participants

of the study aid the determination of the appropriate population. For the purpose of this study, the

researcher will consider


33

The reason for the choice of managers of organizations is because the subject under study requires

respondents to have a fair if not in-depth understanding and knowledge about the decision making

process in the organization.

3.2.3 Sample and sampling techniques

A sample represents the participants that will be selected by the researcher among the population.

In qualitative research, small samples are used and studied in their context to gain a deeper

understanding (Miles, et al., 2014). They mentioned that qualitative samples tend to be purposive

and strategic rather than random. Hence, this study will adopt the purposive sampling technique

in selecting respondents that will make up the sample. The purposive sampling method recognizes

and selects participants or group of participants that are especially knowledgeable about or

experienced with the subject under consideration (Creswell, 1994). The study seeks to consider a

sample of about twelve (12) managers.

3.3 Data Analysis

Qualitative analysis of data is the process of making sense from research participants’ views and

opinions of situations, corresponding patterns, themes, categories and regular similarities (Cohen,

et al., 2007). In simple terms, analysis of data gathered by the researcher includes the process of

tranferring data through certain procedures into clear and understandable texts. Analysis of data is

crucial since it reduces raw information, separates significant materials from trivia and identifies

an apposite medium for communicating the essence of what the data reveals (Patton, 2002). Data

collection and data analysis will be carried out concurrently since separating the two makes the

analysis an arduous task that may frustrate the researcher (Miles, et al., 2014).


34

There are numerous approaches to qualitative data analysis. Some of these approaches include

coding, hermeneutics, semiotics, conversational analysis, discourse analysis, narrative analysis

and thematic analysis. The study seeks to utilize thematic analysis for the interview data and

observations. Thematic analysis can be defined as identifying, analyzing and reporting patterns

(themes) within data (Braun & Clarke, 2006). Using thematic analysis, the researcher will

transcribe interview data, reflect on the data for patterns, categories, regularities and threads to

emerge inductively (coding), organize excerpts or codes into themes, review these themes and

produce a report (Braun & Clarke, 2006). It is essential to extract codes from the interview data so

that these codes can be categorized into themes to establish a connection among the different parts

of the data. Thematic analysis will aid interpretation of data in great detail since it deals with a

variety of subjects (Braun & Clarke, 2006).

This section gives a detailed account of how the interview data collected was analysed to answer

research questions, achieve research objectives and draw conclusions with corresponding

recommendations.

Transcription of interview data

The data analysis began with collecting data. This was done by taking field notes as well as

recording face-to-face interviews. Following this, the data was documented by transcribing the

qualitative data into a textual form (Schutt, 2011). The initial transcription of data aided in

familiarizing with the data to shape how follow-up interviews were conducted to seek clarification

into responses Invalid source specified.. The researcher’s attention on the initial transcription was

also drawn to non-verbal cues regarding the manner in which respondents answered the interview


35

questions. After the interviews, the major points were emphasized to ensure that the views of the

respondents were clearly represented.

Condensation of data

The researcher’s reflection on the transcribed data enabled patterns, regularities and irregularities

to emerge which constituted the basis for identifying key themes (Braun & Clarke, 2006). This

process aided in condensing the data collected and eliminating aspects of the data that did not

contribute to answering research questions and identifying key findings. Summatively, the

condensation process of data included selecting, focusing and transforming the transcribed data

together with field notes and other empirical materials (Miles, Huberman, & Saldana, 2014). The

process of condensing data continued till the end of generating the data analysis report to

emphasize key findings. It also aided in categorizing data chunks into codes to draw out labels

which best described a group of codes (Miles et al., 2014).

Coding data

At this stage, the condensed data from data chunks were grouped into texts and assigned codes.

Coding is essential to qualitative data analysis because it reduces data chunks and aids organizing

data Invalid source specified.. Data chunks with similar patterns or ideas were assigned the same

codes (Saunders et al., 2009). The coding of the empirical material was inductive and based on

the researcher’s reflection.


36

Categorization of data

This stage constitute the final stage of data analysis whereby categories where assigned similar

codes derived from the previous stages to make these categories more meaningful (Saunders et al.,

2009). These categories formed the basis for developing thematic areas for the discussion of

findings and extracting corresponding conclusions (Braun & Clarke, 2006). Categorization of

codes into themes was informed by literature as well as the researcher’s reflection on the empirical

material. Codes were categorized into themes based on their similarities to ensure the themes were

all reasonably distinct from one another (Braun & Clarke, 2006). The themes served as the basis

for discussions of the data.

3.4 Chapter summary

This chapter discussed the methology of the study. First, it discussed the research design

comprising research method as well as research approach employed by the researcher. Ethical

considerations were also discussed. Second, it presented the data collection methods composed of

population, sample and sampling techniques. Third, the chapter thoroughly discussed how data

collected for the study will be analyzed.


37

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION OF FINDINGS

4.0 Introduction

This chapter presents and interprets the data collected for the study. This chapter discusses themes

that emerged from data gathered during interviews which were transcribed and reflected upon

thereafter by the researcher. In what follows next, the use of accounting information in stages of

decision-making process is discussed and other themes are elaborated in subsequent sections in

the chapter.

4.1 Usefulness of accounting information in stages of the decision-making process

Accounting can be conceptualized as a system that gathers relevant information about economic

activities of an entity and reports on these activities to stakeholders. Accounting, therefore,

generates information in the form of documents and reports that reflects organizational economic

activities for both internal and external users of accounting information. Accounting information

constitutes an outcome or output of the accounting process. Consistent with this proposition,

Galbreath et al. (2012) intimated that the accounting process generates accounting information

from an entity’s economic activities for both internal and external decision makers. Within this

process, financial data are categorized based on economic activities. It can be argued that

accounting information has become an indispensable source of information especially for

managerial decision making. However, to determine the usefulness of accounting information in

managerial decision-making process, it must meet certain qualitative characteristics such as

accuracy, relevance, timeliness, comparability and understandability. These characteristics


38

emphasize the level of quality of accounting information and how useful it will be to both managers

and board of directors in decision making.

Drawing on Harrision’s (1995) managerial decision-making process, it is evident that six stages

constitute this process. These stages include setting managerial objectives; searching for

alternatives; comparing and evaluating alternatives; the act of choice; implementing decisions; and

follow-up and control. Notably, it is worth understanding how managers at GHEL use accounting

information in the managerial decision making process. As a result, the researcher inquired from

respondents that at what stage or stages of managerial decision-making process is accounting

information relevant. The following are excerpts from the responses of some managers at GHEL.

“accounting information is used at the beginning, whilst in progress and at the end. It is

used to estimate accounting figures at the beginning of activities to determine the possible

financial impact on the company. Whilst in progress, it is used to track whether it is worth

pursuing whereas at the end, helps to assess the overall impact of the decision on the

organization”

“accounting information is used for planning and executing of decision or planning and

implementation of decisions”

Consistent with the accounts of GHEL managers, Bruns (1968) stated that accounting information

has close association with decision making processes. He argues that the process of decision

making consists of many inputs in which accounting information serves as a very important

component. Observably, the use of accounting information by managers to make decisions

depends on their objectives and analytical abilities. In the understanding of Bruns (1968),


39

managers explore the relationship between the objectives of specified economic activities for

which decisions will be made and the decision to be made by drawing on accounting information

to evaluate and analyze the effects of past events similar to the decision to be implemented in the

future.

The inclusion of accounting information in the decision making process is determined by a

decision rule which consists of nonfinancial information and accounting information (Bruns,

1968). In considering the decision rule that will maximize the output of decisions, managers weigh

the relevance of nonfinancial information and how their combination with historic accounting

information will influence the effectiveness and efficiency of the outcome of a decision. In the

case where accounting information is assigned a weight of zero, managers may not consider using

it as an input in the decision making process. More realistically, in making economic decisions

managers perceive accounting information as an essential element in the decision-making process.

This is case with managers at GHEL who employ a decision rule within which accounting

information plays a significant role. Similarly, Harrision (1995) intimated that managerial decision

making as an ongoing process uses accounting information to evaluate alternatives to identify

which alternative meets the objectives and expectations of a particular course of action.

Accounting information can, thus, be said to impact managerial decision making at GHEL

although its usefulness as an input for managerial decision-making depends on the type of

decisions to be taken by management. Arguably, it is used in most economic decisions about

organizational operations.


40

4.2 Roles of accounting information

The usefulness of accounting information in managerial decision making can better be understood

by considering the roles of accounting information in the decision-making process. These include

financial management, estimation of organizational growth, investment appraisal, determination

of organizational profitability and position, and performance evaluation. These roles of accounting

information are discussed in turn in the next sections.

4.2.1 Financial management

Financial management is a key role of managers in ensuring an organization’s success.

Considering the uncertainties and other features of decision-making, accounting information is an

essential tool in analyzing possible courses of action. In the context of organizational decision

making at GHEL, it is the responsibility of managers to make decisions that maximize the use of

economic resources. To do this, managers draw on different sources of accounting information

such as cost and management accounting information in a reflexive process to make visible the

consequences of decisions on economic activities. Integrating accounting information in the

decision-making process enables efficient allocation of organizational resources to enhance

organizational performance. Accounting information plays a facilitatory role in financial

management by enabling managers to make decisions that minimize cost and maximize revenue

from economic activities. Besides, managers draw on financial reports to ascertain the financial

health of an organization in order to develop strategies to meet short-term, medium-term and long-

term financial objectives. For instance, by using management accounting information managers

are enabled to utilize funds efficiently, manage cash and determine the sources of finance to fund


41

organizational activities. Regarding the role of accounting information in facilitating financial

management, a respondent mentioned that,

“managers use accounting information to manage cost by cutting down expenses at

nonperforming departments, sections or portfolios”

Another respondent noted that,

“accounting information has the ability to provide the financial information about the

current financial state of the company”

Accounting information especially management accounting information possesses a strategic

orientation that is future-oriented (Porter, 1986). Inherent in management accounting information

are costing techniques, competitor accounting and customer accounting information necessary to

manage financial resources available to an organization such as GHEL (Fowzia, 2011; Guilding

et al., 2000). Financial management seeks to achieve the ultimate goal of achieving profitability

while ensuring adequate finances for an organization to carry out operations to realize operational

efficiency goals. Managers can utilize accounting information to achieve financial management

objectives.

4.2.2 Investment decision making

Investment decision making is a crucial role of managers. Accounting information assists

managers at GHEL to reflect on investment decisions and consider alternatives that will lead to

optimum utilization of economic resources to generate returns. Investment decision making

requires the utilization of adequate information to identify optimal decision alternatives that yield

optimum outcomes. Also, managers are well informed by accounting information to assess the


42

risks associated with investment portfolios. More specifically, managers need to understand and

assess the risks associated with acquisition of financial instruments such as financial assets

(Alkaraan, 2017). A respondent stated that,

“accounting information helps us to know what we can acquire and invest in a company”

Another respondent averred that,

“accounting is used usually when we want to acquire a property or make an investment

and this is because, with the financial knowledge of the company through accounting, we

are well informed as to our ability to acquire or invest”

Relatedly, Slovic et al., (1972) stated that the approach to investment decision making requires the

decision maker to make quantitative evaluation of the investment while considering a variety of

characteristics. Accounting information, therefore, endows managers with financial knowledge

needed to make investment decisions. This agrees with the view of a manager at GHEL who

mentioned that,

“Yes….top management including the CEO and sometimes the board of directors will firest

of all analyse any investment to determine the profitability and affordability of it……if they

give the go ahead, it is passed on to a branch or departmental manager……he also engages

his departmental or sectional managers and supervisors for implementation”

Managers, thereby, are enabled to make meaningful decisions that optimize returns from

investments and increase the economic value of the entity.


43

4.2.3 Organizational growth

Effective and efficient flow of accounting information in the decision-making process aids

managerial decision making thereby increasing the capability of the organization. More

particularly, managers at GHEL draw on economic data derived from financial reports and

documents to estimate the growth rate of the company. Managers at GHEL are engaged with

activities that require quality and reliable accounting information needed to determine

organizational growth. Accounting information generated from economic activities of the entity

are analyzed by management to determine the effects of these activities on the entity’s growth. In

estimating organizational growth, managers compare current year financial reports to previous

year financial reports and current year projections to identify increase in the value of economic

resources such as assets. One of the respondents commented that,

“accounting information helps managers to determine the growth rate of the company via

its asset value over time”

Managers employ accounting techniques to produce reports of financial data that can be used to

track organizational growth. In managerial decision-making process, determining the growth of

the entity is essential to develop strategies to improve performance and maximize the value of

economic resources.

4.2.4 Performance evaluation

Evaluating organizational performance to meet set targets is an important role of financial

managers who need accounting information to carry out this function. Observably, there is a strong

relationship between quality accounting information that aid economic decision management and


44

organizational performance. In evaluating performance, managers engage with accounting

information of previous years and carry out a comparative analysis to information on current year

budgets, forecasts and other benchmarks. In doing so, managers are able to measure the extent to

which objectives of the organization are achieved, identify peculiar results and design strategies

to mitigate the effects of unfavorable organizational results. Consequently, managers can make

decisions that improve the overall value of the entity. One of the respondents noted that,

“almost every major decision of a manager uses accounting information. A manager’s

major responsibility is to generate revenue and therefore, there should be financial

estimates to evaluate how decisions affected the organization’s performance”

In agreement, Haron et al. (2013) posited that accounting information especially management

accounting information provides managers with sound knowledge on performance and prospects

of the organization. This enables the development of appropriate strategies to improve current

organizational performance. Managers at GHEL recognized the importance of evaluating

performance and monitoring how it aligns with organizational goals. To achieve operational

excellence, managers track how the organization has utilized available resources to generate

revenue over a given period. A detailed analysis of accounting information is also carried out to

identify operational challenges, implement necessary strategies, monitor progress and take

corrective actions to achieve organizational objectives.

4.2.5 Organizational profitability and position

The use of accounting information assigns quantitative values to past transactions relevant for

current and future decision making. Financial and accounting data equips managers with an


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overview of transactions recorded in traditional financial statements such as income statement,

statement of cash flows and statement of financial position. Moreover, accounting information

produces special purpose financial reports needed for managerial decision making such as budgets,

performance variance reports and profitability schedules needed for the assessment of an entity’s

performance. A manager at GHEL remarked that,

“managers use accounting information to determine profitable departments and channel

resources there”

One of the managers also mentioned that,

“accounting information helps managers know how profitable the whole company is. It

helps managers to know whether they are making losses or profits”

Financial reports from accounting data helps managers to determine profits or losses in the

business operations of an entity. Particularly, financial statements such as income statement and

statement of financial position provide managers with a summary of the entity’s performance and

position showing revenues, expenses, value of assets, liabilities and capital. Managers at GHEL

find these elements of accounting information useful in forecasting future operational plans in

order to improve organizational profitability and competitive positioning.

4.3 Chapter summary

This chapter uses thematic analysis as suggested by Braun & Clarke (2006) to provide an analysis

of themes that emerged from the transcribed interview data. The researcher reflected on the

interview data to identify patterns, regularities and ideas from respondents to generate initial codes

which were thereafter categorized into themes. The chapter discussed usefulness of accounting


46

information in the decision-making process as well as other themes such as financial management;

investment decision making; organizational growth; performance evaluation; and organizational

profitability and position.


47

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This chapter presents a summary of key findings, conclusion, research limitations and

recommendations for further studies. It is, thus, structured as follows;

• Summary of findings;

• Conclusion; and

• Limitations and recommendations for future studies.

5.1 Summary of key findings

This section summarizes key findings in an attempt to provide answers to the research questions

and achieve research objectives. These findings are briefly discussed hereafter in turn.

5.1.1 Usefulness of accounting information in stages of the decision-making process

The study finds that accounting information constitutes an outcome or output of an accounting

process. Within this process, financial data is gathered from economic activities of an entity. The

study indicates that managers at GHEL use accounting information in the managerial decision-

making process suggested by Harrision (1995) to evaluate and analyze effects of past events

similar to decisions to be implemented in the future. Besides, the inclusion of accounting

information in the decision-making process is determined by a decision rule that comprises both

accounting and nonfinancial data. The study finds that accounting information is an indispensable

component in the managerial decision-making rule.


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5.1.2 Financial management

The study indicates that financial management is a key role of managers in ensuring organizational

success. In achieving the goals of financial management, managers draw on different sources of

accounting information such as cost and management accounting data in a process of reflection to

make visible the consequences of managers’ decisions on economic activities. The study notes that

inherent in accounting information especially management accounting information are costing

techniques, competitor accounting and customer accounting information necessary to manage

financial resources available to an entity.

5.1.3 Investment decision making

The study finds that accounting information assists managers at GHEL to reflect on investment

decisions and consider alternatives that will lead to optimum utilization of economic resources.

Managers also utilize accounting information to assess risks associated with investment portfolios.

In doing so, managers make quantitative evaluation of investments and consider a variety of

characteristics of the investment. Managers thereby make useful investment decisions necessary

to bring maximum returns.

5.1.4 Organizational growth

The study mentions that managers at GHEL engage with quality and reliable accounting

information for the purpose of tracking organizational growth. Managers, therefore, compare

current year financial reports to previous year financial reports and current year budgets to identify

increase in the value of economic resources such as assets. This helps managers to make


49

meaningful decisions regarding strategies to improve organizational growth and foster

development.

5.1.5 Performance evaluation

The study indicates that there is a strong relationship between quality accounting information and

organizational performance. In evaluating such performance, managers engage with accounting

information of previous years and compare them to current year budgets, forecasts and other

benchmarks. In so doing, managers are able to evaluate the performance of the entity and make

decisions on strategies that mitigate the effects of unfavorable operational outcomes. Managers are

also enabled to ensure that performance of the entity aligns with the organization’s objectives,

necessary decisions are made to monitor progress and corrective actions are taken, where

necessary, to achieve the company’s objectives.

5.1.6 Organizational profitability and position

The study finds that accounting information assigns quantitative values to past transactions

relevant for current and future decision making. Within this, financial and accounting data are

generated to equip managers with an overview of transactions recorded in traditional financial

statements such as income statement, statement of cash flows and statement of financial position.

Other special purpose financial statements such as budgets, performance variance reports and

profitability schedules are also provided to assess organizational performance. Consequently, the

entity’s financial performance and position is shown on the face of financial statements in elements

such as revenues, expenses, assets, liabilities and capital. These assist managers to forecast future

operational plans to boost the company’s profitability and competitive positioning.


50

5.2 Conclusion

This study has presented an analysis on the usefulness of accounting information in the managerial

decision-making process. It discussed the roles of accounting information in the decision-making

process. It reveals that accounting information plays a significant role in determination of

organizational profitability and position; performance evaluation; organizational growth;

investment decision making; and financial management.

These roles of accounting information are considered crucial in achieving organizational

objectives. Altogether, they enhance managerial decision making to improve organizational

performance and competitive positioning.

5.3 Limitations and recommendations for future research

The results of the case study are on the basis of one public entity and therefore, cannot be

generalized to other settings. However, this study is not focused on generalizations of findings but

rather on the usefulness of accounting information to managers at GHEL during the decision-

making process. Nonetheless, the findings may have implications for other contexts. Some of the

data gathered could also not be fully disclosed in the study limiting the ability of the researcher to

report on all the themes that were generated. The researcher also incorporated personal

observations in reporting findings. For future research, the researcher recommends the use of

participant observation or ethnography in order to critically assess how managers actually engage

with accounting information in the decision-making process.


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APPENDIX

Interview Guide

Research topic: The perception of managers on the usefulness of accounting information during

decision making

Brief background of respondents

Kindly provide a brief background about yourself including your current position and institution.

The researcher acknowledges and understands that all information provided are confidential. As a

result, the researcher will use the information only for academic purposes.

1. How long have you served as a manager?

2. How will you define accounting information and what are its components?

3. What purposes do managers use accounting information for?

4. Under what circumstances do managers use accounting information? Why?

5. With other sources of information available, what is it about accounting information that

managers find helpful?

6. Do you consider decision making important to organizational success? Why?

7. What are the components of decision making in this organization?

8. Do you have any structures for decision making and implementation? What are they?

9. Is accounting information used for every managerial decision, if yes or no, why is it so?

10. At what point of decision-making process is accounting information relevant? Why?

Thank you


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Interview Schedule

Pseudonym Title Duration Interview type

Respondent 1 Sales engineer 20 minutes Face -to-face

Respondent 2 Manager 30 minutes Face -to-face

Respondent 3 Branch manager 18 minutes Face -to-face

Respondent 4 Branch manager 25 minutes Face -to-face


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