The purpose of this study is to investigate the effects of misfits between business strategy and management control systems on performance. We address the following research question: Do firms that align their management control systems with the specific requirements of their business strategy perform significantly better than those that do not achieve the required match? We define a misfit as the degree to which management control systems deviate from empirically derived optimal configurations for a given type of business strategy. We use the two-stage approach proposed by Ittner and Larcker (2001) to measure misfit and to investigate the impacts of misfit on performance. Based on a questionnaire survey of executives from 109 banks, we hypothesize and find that the strategy-control systems misfit has a significantly negative correlation with both self-rated and publicly available performance measures.
RÉSUMÉLes auteurs ont pour but d'analyser les re´percussions qu'ont sur la performance les inade´quations entre les strate´gies d'entreprise et les syste`mes de controˆle de gestion. Ils se penchent sur la question suivante : « Les entreprises qui coordonnent leur syste`me de controˆle de gestion avec les exigences particulie`res de leur strate´gie d'entreprise affichent-elles une performance sensiblement meilleure que celles qui n'y parviennent pas ? » Selon les auteurs, l'inade´quation s'entend de la mesure dans laquelle les syste`mes de controˆle de gestion de´vient des configurations « optimales » de´rive´es de l'expe´rience, pour un type donne´de strate´gie d'entreprise. Ils utilisent l'approche en deux temps propose´e par Ittner et Larcker (2001) pour mesurer l'inade´quation et pour e´tudier les re´percussions de l'inade´quation sur la performance. À la lumie`re d'un sondage par questionnaire mene´aupre`s de cadres supe´rieurs de 109 banques, ils confirment l'hypothe`se formule´e selon laquelle l'inade´quation entre strate´gie et syste`me de controˆle pre´sente une corre´lation ne´gative significative avec les mesures de la performance, tant lorsque cette dernie`re est auto-e´value´e que lorsqu'il s'agit d'une donne´e accessible au public.
The purpose of this study is to measure auditor quality of The Audit Board of the Republic of Indonesia (BPK) and investigates the effect of auditor quality on the follow-up of audit recommendation. This study uses sample of local government financial statements in Indonesia from 2010-2012. Using principle component analysis method, the result shows that there are four components extracted that form auditor quality which is experience, training, motivation, and education. All four components are then combined into a single auditor quality index that represents comprehensive measure of auditor quality. The test result shows positive effect between auditor quality and follow-up of audit recommendation. This indicates that high quality auditor is able to produce appropriate recommendations that can be easily followed up by the auditee. The more recommendations are acted upon, the better the quality of local government financial statements.
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