“Do Budgeting Practices Improve Financial Performances of SMEs in Japan?” by Professor Norio SAWABE
Professor Norio SAWABE
Professor of Finance and Accounting
Graduate School of Management
Management accounting in small and midium-sized enterprises (SMEs) has been an issue of growing interest. Management accounting systems are found to improve overall business performance when they provide information relevant for decision making (Lopez & Hiebl, 2015). Most of the existing empirical research on the association between management accounting practices and performances are based on subjective measures of performance. The analysis of this paper is based on two sets of data: objective financial performances of SMEs, and expert’s perceptions on their client SMEs’ management accounting practices and related contingent factors such as a top management commitment to use management accounting systems. Following a series of qualitative research that we conducted to investigate the use and value of management accounting practices of SMEs in Japan, this paper focused on budgeting practices; a forward looking set of numbers which projects the future financial performance of a business, useful for evaluating the financial viability of the current business model (Davila & Foster, 2005, King et al, 2010). Based on the data of 364 SMEs in Japan, multiple regression results supports positive correlation between the use of management accounting systems and financial performances when the size, age, industry are controlled.