The effect of adoption of management accounting practices on financial performance of commercial parastatals in Kenya
Apunda, Mary Auma
Ndede, Fredrick W. S.
MetadataShow full item record
Purpose: The main purpose of this study was to investigate the effect of adopting management accounting practices on financial performance of commercial parastatals in Kenya. Methodology: The study employed a descriptive survey research design and targeted all the 119 commercial parastatals in Kenya. The study used simple random sampling technique to select 69 respondents from the commercial parastatals in Kenya. Qualitative and quantitative data was analysed descriptively. Inferential statistics was applied where multiple linear regression analysis was done through Statistical Package for Social Sciences (SPSS) to establish the relationship between the selected management accounting practices and the financial performance. The analysed data was presented graphically visually by use of figures and tables. Results: The results from the study concluded that management accounting practices including budget process, variance analysis, and breakeven analysis affected the financial performance of commercial parastatals in Kenya. From the findings, it was realized that budgeting process is critical in supporting financial performance of commercial organizations under the government parastatals. It was established that variance analysis determines the difference between tangible financial performance and the deliberate financial decisions emanating from the various personnel, which thereafter culminate to improved levels of financial performance of the organization. Break-even analysis affects financial performance of commercial parastatals. Unique contribution to Theory, Practice and Policy: The study recommended that the management of the parastatals should adopt budgeting in all financial activities of the firm as it is a central parameter that influences the overall financial performance and dictates how the commercial parastatals utilize assets to generate revenues. Commercial parastatals must have policies in place to help develop financial applications to be used in budgeting and invoicing for monitoring predictions that indicate whether the parastatals are in the right financial trajectories or otherwise.