INSTITUTIONAL PRESSURES AND ACCOUNTING CONTROL PRACTICES OF SMALL AND MEDIUM MANUFACTURING ENTERPRISES (SMMES) IN LAGOS STATE
The extent to which institutional pressures informs SMMEs’ choice of accounting controls system seems unclear as considerable evidence in this line of thinking are only available for large firms and public sectors organizations. In view of the foregoing, the study investigated the extent to which institutional pressures (Regulatory, Association and provider of capital pressures) influence small and medium manufacturing enterprises (SMMEs) choice of accounting control mechanisms (diagnostic budget, interactive budget and comprehensive reward system). The study obtained quantitative data through self-administered questionnaire from randomly selected 262 managers of small and medium manufacturing enterprises in Lagos State. The obtained data were subjected to multiple regression analysis (Ordinary Least Squares). The findings of the study revealed that institutional contingency (association and regulatory) influence the choice of accounting control mechanisms. Specifically, variation in diagnostic budget practice is explained by regulatory pressure), Choice of interactive budget practice is also informed to a greater extent by both regulatory pressure and association pressure, while the choice of comprehensive reward system is driven by both regulatory and association pressure. Based on these findings, the study concludes that managers of small and medium manufacturing enterprises may use accounting control techniques as driven by association pressures and regulatory pressures not necessarily by the need to achieve goal congruence. Consequently, organizations may unnecessarily incur avoidance cost on the use of accounting control for other purposes that are not goal – congruence. Therefore, SMMEs owners/managers are advised to resist any institutional pressure in the choice of accounting control techniques. Instead, efforts should made towards achieving fit between chosen accounting control technique and the control problems such technique can effectively resolved.
