An Overview and Assessment of Contemporary

Management Accounting Research in China

Abstract

This paper provides an overview of 283 management accounting research articles

published in 18 major Chinese academic journals from 1997 to 2005. We classify these
articles by seven major topic areas, and find significantly different topic mixes between
1997-2001 and 2002-2005. In terms of research method, normative/conceptual papers
dominate the sample in both sub-periods, followed in descending order by case studies,
surveys, field-archival studies, and analytical modeling research. While most of the studies
assume a generic setting, there is an increasing focus on specific industries in the later
(2002-2005) period. Significantly, about 80 percent of the papers do not have any explicit or
detectable application of theory. Among the theory-based articles, finance and economic
theories are most often applied. Finally, we find considerable overlap between the topics of
research and those considered important by managers.
Overall, this body of work has provided interesting insights into the history and
current state of management accounting practices in China. However, because of insufficient
application of theory and other methodological limitations that we identify, it has not yet built
a strong basis for understanding and leading management accounting development in China.
As such, it is encouraging that the number and proportion of theory-based studies, as well as
applications to specific rather than generic settings are increasing over time. We discuss these
factors and suggest directions for the future development of management accounting research
in China.

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 I. Introduction and Overview

Since China embraced privatization and market reform in 1978, Chinese firms have

gained global importance as suppliers, competitors, customers, partners and targets of foreign

investment (OECD 2005). This development, in turn, has stimulated interest in understanding

Chinese firms’ management practices. Over the years, a number of studies have appeared in

the international (English) literature describing or analyzing Chinese firms’ management

accounting practices (e.g., Skousen and Yang 1988; Bromwich and Wang 1991; Scapens and

Meng 1993; Firth 1996; Chalos and O’Connor 2004; O’Connor et al. 2004; Chow et al. 2007).

While these studies have contributed useful findings, they have only looked at limited aspects

of the phenomenon.1 Furthermore, they have almost exclusively been survey based and as

such, lack the ability to explore in depth the nature of processes or issues of “how” and

“why” (Yin 1987).

A number of reasons probably underlie the limited scope and size of this (English

language) literature. One is undoubtedly the relatively recent advent of interest in China

among non-Chinese management accounting researchers. Probably more important is the

language barrier. While there is a country-wide push for English learning, the number of

Chinese business managers with good command of English is still low, especially at ranks

below the top levels. And beyond problems of oral communication, internal documents of

Chinese business enterprises (except for joint ventures) are exclusively in Chinese.

Compounding this barrier, Chinese companies are as yet not accustomed to opening

1. Chow et al. (2007) review studies of management accounting in China published in both English and Chinese
journals in order to provide a background for understanding and interpreting the current use of various
management accounting techniques and historical development of management accounting and controls in
China. By contrast, the present study reviews management accounting research published in Chinese
journals with a view to (1) assessing the literature’s coverage, depth, relevance to practice and theoretical
and methodological adequacy and (2) identifying research opportunities and areas where improvement can
be made.

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themselves to outsiders for research purposes. Rather, such access requires trust based on

good interpersonal relationships built over an extended period (“guanxi”) (O’Connor et al.

2004).

In conjunction, these factors suggest that at least for some time, the primary source of

knowledge about Chinese firms’ management accounting practices will remain the

scholars/writers residing and working in China. By providing an overview and assessment of

management accounting research published in China in the Chinese language, we hope to

achieve two key objectives: (1) give external, non-Chinese reading individuals an overview,

or at least a flavor, of this literature to supplement the information in English sources; and (2)

identify possible directions for developing and refining such research, which also may help

Chinese and foreign scholars to identify opportunities for collaboration.2

To keep the scope of this undertaking to a manageable level, we limited this review to

the major Chinese academic journals that publish management accounting research, based on

the assumption that these outlets would tend to uphold higher standards of objectivity and

rigor. To select the journals for inclusion, we asked senior accounting faculty of 10 Chinese

universities to identify the core journals that their institutions used for promotion and tenure

decisions.3 The following 18 journals came from aggregating their responses. While some of

these (e.g., Accounting Research, Auditing Research) have an obvious accounting focus,

others (e.g., China Management Science, Economic Sciences) cover a range of business-

related topics.

2. Our review is thus similar in spirit to Wagenhofer (2006), who reviews management accounting research in
the German language journals.
3. Five of these are comprehensive universities that have the largest number of key academic disciplines in
economics and management conferred by the Ministry of Education. These are Nankai, Fudan, Wuhan,
Tsinghua, and Peking. The other five are the first ones authorized by the government to offer an accounting
PhD program: Xiamen, Renmin, Northeast University of Finance and Economics, Shanghai University of
Finance and Economics, and Central South University of Finance and Economics.

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 • Accounting Research
• Auditing Research
• Banking Research
• China Accounting and Finance Review
• China Management Science
• China Soft Sciences
• Economic Research
• Economic Science
• Economic Theory and Economic Management
• Finance and Accounting4
• Finance and Economic Research
• Management Science
• Management World
• Nankai Economic Research
• Nankai Business Review
• Public Finance Research
• Peking University Journal (social science edition), and
• Tsinghua University Journal (social science edition).

To balance comprehensiveness and currency of coverage, we collected all

management accounting-related articles published in these journals for the period 1997-2005.

The year 1997 was selected as the starting point because it marked a major change in thinking

in China’s central government, which wields absolute power over how economic activities in

the country are conducted. During the 15th National Congress of the Communist Party held in

that year, the then Secretary-General of the Communist Party of China, Jiang Zeming,

ushered in an ideological breakthrough by calling for experimenting with all forms of

ownership that can be used to advance socialist productive forces (Jiang 1997). In particular,

he identified shareholding companies as a useful tool for transforming the thousands of

state-owned-enterprises.5 We concluded with 2005 because this was the last year for which

4. Finance and Accounting has been treated as a practitioner journal by some major Chinese universities in
recent years, but before 2005 (the last year covered by our survey), it was a major outlet of management
accounting papers written by academics. This is still the case and the trend may well continue for sometime
in the future.
5. While the earlier 14th National Central Committee of the Chinese Communist Party (Jiang 1992) had already

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complete volumes for all the journals were available at the time of data collection (late

2006).6 To gain insights into the direction of recent developments, we further divide the

1997-2005 time span into 1997-2001 and 2002-2005 sub-periods. 2001 was the year that

China became a member of the World Trade Organization. This has brought requirements for

substantially increased market openness, reduced government interference, and increased

management autonomy. Open-end mutual funds also became available in China in 2001, and

have since become important participants in the Chinese stock market.7 Meanwhile,

government actions to strengthen the role of external participants in corporate governance,

investor protection and shareholder activism have accelerated.8 Developments like these are

likely to have increased Chinese firms’ incentives and ability to improve their management

accounting practices, in turn possibly affecting Chinese management accounting researchers’

topic choices and access to data.

In screening the articles for inclusion, we followed Luft and Shields (2003: 172) and

defined management accounting as accounting in the management of organizations, not for

use by capital markets, taxation, auditing, etc. Thus, our search covered a wide range of

endorsed use of capitalist institutional forms and management methods in its “Resolutions on the
Establishment of a Socialist Market Economy,” Jiang’s 1997 report paved the way for politically and
ideologically accepting joint-stock companies as a means of organizing societal resources. An indication of
the importance of this ideological change is that the number of listed companies jumped from 745 in 1997 to
1,377 by the end of 2004.
6. Given the direction of developments that we observe, it is quite possible that the articles published in 2006
would exhibit a different pattern from those of the earlier years. However, the relatively small number of
management accounting articles published each year is unlikely to fundamentally change our overall
conclusions.
7. The first open-end mutual fund was introduced to China in September of 2001 (China Economic Times
2002). By the end of 2003, 54 closed-end and 41 open-end mutual funds had been established. By the end of
2004, the net assets of mutual funds had grown to nearly 25 percent, and they held 13 percent, of the total
tradable share market capitalization in China’s two domestic stock exchanges (Securities Daily 2005).
8. For example, the China Securities Regulatory Commission issued “Guidelines for Establishing an
Independent Directors System for Listed Companies” in August 2001 and the “Code of Corporate
Governance for Listed Companies in China” in January 2002. The Guidelines and the Code imposed explicit
requirements for the appointment of qualified independent directors on corporate boards, prohibited the
appointment of controlling shareholders and associated parties to be directors, and conferred greater powers
on the independent directors for monitoring related parties transactions and for the appointment and
dismissal of auditors, directors, and senior executives.

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techniques or systems ranging from cost-volume-profit analysis to strategic management

accounting, but excluded measurement and recognition criteria/standards for financial

reporting, auditing or taxation. In total we found 283 management accounting articles, most

of which had appeared in two journals: Accounting Research (116) and Finance and

Accounting (124). Of the 283 articles, 133 (47.0 percent) examined issues regarding

management control systems, 69 (24.4 percent) focused on cost accounting and management,

19 (6.7 percent) pertained to externally oriented management accounting, and the remainder

are spread among decision-making techniques, information technology applications, general

issues in management accounting, and a variety of other management accounting-related

topics. We also found some significant differences in the distribution of articles among topics

between 1997-2001 and 2002-2005.

To categorize the articles by research method, we defined normative/conceptual

papers as ones that develop ideas or arguments without using data or modeling (Maher 2001).

Case studies are research undertakings that involve the observation in natural settings of

policies, practices, people, structure and context within a single organization (Birnberg et al.

1990). A field-archival study is similar to a case study except that the data of interest are

publicly available through, for example, data bases. A survey study typically involves

distributing questionnaires to collect data of interest from respondents in a sample of

organizations (Kerlinger 1986; Birnberg et al. 1990). Finally, an analytical modeling study is

defined as one that involves mathematical proof of propositions or searching for optimal

solutions through, for example, optimization techniques. We found that normative/conceptual

papers dominated the sample, followed in descending order by case studies, surveys,

field-archival studies, and analytical modeling research. There was a significant association

between the papers’ age and their research methods. There also was a greater focus on

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specific industrial, as compared to generic, settings in the 2002-2005 period. In terms of

theoretical underpinnings, we found that 227 (80.2 percent) of the articles were totally based

on the authors’ own reasoning, with no explicit or detectable application of extant theories or

reference to empirical evidence. Among the much smaller number of articles that do

explicitly or implicitly invoke theories, finance and economic theories are applied most

frequently. Since theory is important for guiding research design and interpreting the findings,

it is encouraging that both the absolute number and proportion of papers applying theories are

substantially higher in the more recent (2002-2005) period.

In the following four sections of this paper, we summarize the contents of the papers

by topics, research methods, use of generic vs. specific industry contexts, and the application

of theory. We also comment on the research, examine trends, and analyze the associations

among these dimensions of the research. A fifth section compares the topics covered by this

set of articles and ones identified by Chinese business managers as being important in the

preceding five years, as compared to currently and in the near future. The final section

provides a summary and an overall assessment.

II. Distribution of Research Topics

To avoid an overly fragmented discussion, we followed the general approach of

Shields (1997) and assigned the 283 articles among the following categories: management

control systems, cost accounting and management, decision making techniques, externally

oriented management accounting, management accounting in general, information

technology applications, and other issues. Specific topics placed under the management

control systems heading are standard costing, operating budgets, performance measurement

(e.g., economic value added (EVA)), transfer pricing, responsibility accounting, performance

evaluation system (e.g., balanced scorecard (BSC)), and performance-based compensation.

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Topics under cost accounting and management include activity-based costing/activity-based

management (ABC/ABM), target costing, and cost accounting and management in general.

Decision-making techniques include cost-volume-profit analysis (CVP) and capital

budgeting.9 Externally oriented management accounting includes strategic management

accounting and value chain analysis. Topics in the “other” category include primarily

value-based management and education.

Table 1 shows that 133 (47.0 percent) of the articles examine issues related to

management control systems, 69 (24.4 percent) deal with cost accounting and management,

19 (6.7 percent) pertain to externally oriented management accounting, 7 (2.5 percent) focus

on decision-making techniques, and 2 (0.7 percent) address information technology

applications. The remaining articles either discuss general issues in management accounting

(34 articles, 12.0 percent) or other issues (19 articles, 6.7 percent).

[ Please insert Table 1 about here ]

Management Control Systems

Among the topics under the management control systems rubric, operating budgeting

(44 articles), performance measurement (47) and responsibility accounting (13) receive the

most attention. Most of the operating budgeting articles point out the pitfalls of,

misunderstandings about, or difficulties in budgeting practices, and offer guidelines for

improvement. For example, Zhao (2003) indicates that mistakes often observed in practice

include preparing budgets for their own sake without thinking of the purposes of budgeting;

mis-perceiving that budgeting is purely a financial exercise; vulnerability to budgetary slack

9. We recognize that several of the topics could reasonably be placed in different categories from those we
selected. Specifically, CVP and standard costing could also be considered cost accounting and management
techniques. However, the general thrust of our findings is not sensitive to these reclassifications, in part due
to the small numbers of studies on these topics. Also, we provide enough detail in Table 1 for readers to apply
their own topic classifications.

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creation; and preparing budgets on an incremental basis without analyzing the costs and

revenues of activities along the value chain. Wang (1999) argues that firms at different stages

of development should have different foci in their budget management systems; e.g., capital

budgeting for new firms, sales budgeting for growth firms, cost control for mature firms, and

cash flows for declining firms. Yu et al. (2004) propose a budgeting system framework which

consists of three modes -- production capacity oriented, sales oriented and profit oriented. In

turn, each mode contains five elements: modules and their relations; relation with financial

accounting, relations with non-financial measures, relations with strategy, and relations with

incentive systems. Beyond these normative articles, there are reports on successful

implementations of budgeting systems which include details on the contents and processes of

budgeting, and how budgeting systems relate to other systems such as responsibility

accounting.

In the area of performance measurement, more than 20 percent of the articles focus on

EVA. Some of these elaborate on the development and components of EVA, and provide

guidelines to enhance the benefits from using this measurement approach. Other papers fall in

one of the following three categories: (1) survey on the potential benefits of EVA to firms, the

procedures in calculating EVA including cost of equity capital, adjustments of GAAP

numbers, and the difficulties of making such calculations; (2) calculations of EVA for listed

companies and comparing the rankings with one provided by Stern Stewart; and (3)

comparing EVA and other financial measures on their association with stock price.

There also are papers that review the development of performance measurement

and/or introduce and compare various performance measures (e.g., shareholder value added,

cash value added, cash flow return on investment), and case studies on how firms evaluate

the performance of departments or subsidiaries. The State-Owned Capital Performance

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Measurement System promoted by the central government is also reviewed, and evaluated by

the associations of measures in the System (e.g., return on equity, assets management) with

stock prices or returns.10 Again, some papers provide suggestions for firms in selecting

performance measures. Pan (2002), for example, argues that different firms need different

performance measures, e.g., high-tech firms (share price based) and traditional firms (net

income based); growth firms (share price based), and mature firms (net income based). She

also argues that it is important to increase incentive contract transparency and the

effectiveness of compensation schemes.

Even though responsibility accounting has long been a part of Chinese firms’

practices, it still attracts considerable attention (13 articles). Perhaps this is due to its

similarity to the economic responsibility system, contract operational responsibility system,

or internal economic responsibility practice in China.11 The research on this topic

encompasses (1) explaining the origin and development of the internal economic

responsibility system (IERS), (2) comparing IERS to responsibility accounting systems in the

West, (3) highlighting the problems with implementing a responsibility accounting system, (4)

describing the operation of internal banks in various firms such as oil and gas companies, and

(5) case studies of the internal contract system’s application in railroad construction projects

and the iron and steel manufacturing industries. For example, Yang (1997) argues that IERS

in China was developed independently from the responsibility accounting systems of the

West. In his view, the main difference between these two systems is that the former assigns

responsibility down to individual employees while the latter stops at the manager level.

Zhang (1997) indicates that the internal bank is a distinctive feature of responsibility

10. See Chow et al. (2007) for a description and historical background of this System.
11. Chow et al. (2007) provide a description of these systems.

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accounting systems in China.12 He also cautions that using a single performance measure

may lead to gaming behavior, and that responsibility accounting systems only assign

responsibility to middle and lower management and employees, but not to board of directors

members and top management. Miao (2000) compares standard costing in Baogang (an iron

and steel company) with responsibility cost management in Angang (another iron and steel

company).

There also are 11 articles on the balanced scorecard (BSC). Most are explanations of

the concepts and contents of BSC and why it is superior to the “traditional” performance

evaluation system. These papers elaborate on the four dimensions of performance measures

as suggested by Kaplan and Norton (1992, 2001) and their linkages with firm strategy,

including one that uses the Coors and Duke Children Hospital cases in the Western literature

for demonstration (Lin and Hu 2002). The limitations of BSC also are indicated, including

the development and implementation costs, and the difficulty of setting targets and weights

for the performance measures. Several papers report on how BSC adoptions in the banking

and high-tech industries enhance competitive advantages. Integrating BSC with other systems

such as EVA, executive stock options, and enterprise resource planning (ERP) also is

discussed. It is pointed out, for example, that applying BSC in an ERP environment can

facilitate access to the performance measurement data, and can help to assess supply chain

performance. Finally, the articles on performance-based compensation either address the

association between managerial incentive contracts and accounting choice by reviewing and

summarizing the agency theory literature, or replicate prior Western studies by empirically

examining the determinants of executive compensation including firm performance,

12. The internal bank is created as a center for settling internal transactions, credit and funds use control, and
responsibility management (see Chow et al. 2007).

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managerial control, managerial ownership, diversification, and firm risk.

Cost Accounting and Management

Among the 69 articles in this category, 31 pursue issues related to ABC/ABM, 10

focus on target costing, nine deal with environmental accounting, and the remaining 19

articles address general issues of cost accounting and management.

The ABC/ABM papers introduce and explain concepts such as value-added activities,

non-value-added activities, cost drivers, resource drivers, activity drivers, and the procedures

of calculating product costs under an ABC system. Symptoms of obsolete cost systems are

also mentioned. Differences between “traditional” cost systems and ABC are discussed by

means of numerical examples, some of which are based on field data. There also are case

studies of why and how some firms in the petroleum, electrical devices, iron and steel, and

railroad industries adopt ABC. Some papers suggest conditions conducive to ABC/ABM

adoption, including adequacy of information systems and quality of the accounting personnel.

Other papers propose integrating ABC/ABM with other management accounting techniques

such as the budgeting system (activity-based budgeting), variance analysis, standard costing,

responsibility accounting, Pareto analysis, cause and effect analysis, and value chain analysis.

Capacity management via ABC is also suggested by differentiating capacity among idle,

non-productive, and productive categories. It is even proposed that cost of capital be included

in ABC product costs for conducting product profitability analysis. Against this grain, one

paper argues that process flows, activity consumption, activity driver rates, and market

situations are random and changing over time, and thus deterministic models of product

costing are not appropriate (Zhang and Wei 2000). This paper, however, does not back up its

assertions with any explicit analytical model. Another paper proposes a workshop activity

optimization model using ABC, and uses data from an actual company to solve the

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optimization problem (Zhang et al. 2002).

The attention paid to target costing (10 articles) may be due to its similarity to the

highly-touted Hangang experience. Hangang is the abbreviated English name of Handang

Iron and Steel Company. Its cost management practice is often compared to target costing and

considered a major factor for the company’s economic success. Research on the Hangang

experience highlights the implementation and distinctive features of this practice: simulated

markets, backward calculation of cost targets, widespread employee involvement, assignment

of cost targets down to individual employees, and cost negation. This last element means that

performance is defined predominantly by cost target achievement. A number of papers are

concerned with whether the Hangang system is or is not target costing. Wang (1998) argues

that it is, while Sun and Cau (2000) argue that it is not because target costing has an ex ante

focus, whereas the Hangang system is ex post because of cost negation. The latter further

note that target costing focuses on new product planning, and extends cost management

beyond the firm to include supply chain partners. Other studies not mentioning the Hangang

experience explain the concepts and implementation of target costing in the product planning

and design stage. Some suggest using ABC to assist in cost estimation. Several suggest the

possibility of employing value engineering.

The nine articles related to environmental protection and sustainable development call

for attention to environmental accounting, and suggest including environmental accounting in

the scope of management accounting. Methods of calculating internal and external

environmental costs are proposed, and their allocation to products is called for to reflect the

“true” costs and to calculate “green bottom lines.”

In addition, there are articles that discuss cost accounting and management issues but

either without specifying a particular management accounting technique, or mentioning

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several techniques at once. Some of these articles call for changes in cost management (e.g.,

adoption of a daily cost reporting system and the total cost management notion) in response

to changes in the manufacturing and market environments and management theories. Others

offer cost management suggestions to firms in the distribution and real estate industries.

There also are case studies on practices and innovations in the petroleum and iron and steel

industries. A paper reports the results of a survey on cost management methods in use.

Proposals also are offered for defining the scope of “modern” cost management and the

concept of cost. Zhang (2004), for example, suggests establishing standards to define costs

and stipulating the procedures for cost calculation and allocation.

Decision Making Techniques

Articles under this heading encompass capital budgeting (four articles) and CVP

analysis (three articles). Relating to the former, a paper argues that risk analysis should be

explicitly incorporated into capital budgeting, and demonstrates Monte Carlo simulation with

a case study. Another paper suggests using EVA as a criterion for assessing the performance

of information technology investments. Others papers either emphasize the distinction

between capital budget administration and the capital budgeting decision, or call for attention

to strategic and organizational aspects of capital budgeting. Articles on CVP include a case

study in the petroleum industry and an explanation of a break-even period measure (the

length of time required to achieve the pre-specified level of profit).

Management Accounting in General

A majority of studies (21 articles) in this category broadly discuss (1) the historical

development of management accounting practices in China, (2) current management

accounting practices and their weaknesses, and suggestions for improvement, (3) the outlook

and trends of management accounting practices, (4) the role of management accounting

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(decision support), (5) the nature of management accounting (humanistic vs. mechanistic),

and (6) the past and outlook of management accounting research. Four articles provide

overviews of management accounting practices in Japan and other Asian countries, address

the impact of a transitional economy on management accounting, or discuss the melding of

management accounting and financial accounting. Nine articles survey management

accounting practices in China.

Externally Oriented Management Accounting

Two lines of research fall into this category: value chain analysis (10 articles) and

strategic management accounting (nine articles). Some papers on value chain analysis

elaborate on the “value chain accounting management” system proposed by a Chinese scholar

(Dawu Yan).13 For example, Yu and Zhang (2005) suggest that this system is an integration

of value chain analysis and management accounting that changes the scope and content of

management accounting, and claim that it is a contribution to accounting theory in the world.

Chi and Yang (2005) position value chain accounting management as a tool as well as an

essential part of value chain management. Yang (2005) proposes changes to information

systems for value chain accounting management to facilitate management and control over

the allied enterprises in the value chain. Other papers propose guidelines for value chain

analysis, integrate value chain analysis with ABC to manage costs along the value chain, or

review the evolution of thoughts about “value,” including the concept of a value chain.

Finally, a paper extends value chain management to the virtual value chain and proposes the

concept of cyber value flow.

The strategic management accounting articles explain the concept and content of

strategic management accounting and its relationship with strategic management. Features of

13. Examples of Yan’s writings on this topic are Yan and Yi (2003a, b).

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strategic management accounting such as its being outward looking, integrated, dynamic, and

long-term oriented are mentioned. Implications for management accountants are also offered,

as are case studies. One of these focuses on Hangang’s implementation of strategic cost

analysis, including value chain analysis, strategic position analysis, and cost driver analysis.

Another reports the experience of an electric appliance company with applying strategic cost

analysis to marketing cost management.

Information Technology (IT) Applications

Two papers fall into this category. One demonstrates how to use Excel to estimate cost

behavior and to prepare budgets. The other argues that conglomerate enterprises should

establish information systems to share information internally among subsidiaries and

operating units; internal management reports can thus be produced for budgetary control,

fund management, and strategy formulation.

Others

Articles that do not fit into the preceding categories cover topics in education (four

articles), risk management (two articles), supply chain issues (three articles), value-based

management (eight articles), human resource accounting (one article), and certified

management accountants (one article).

Comparing the Foci of Research between 1997-2001 and 2002-2005

We used a chi-square test to assess whether there was a significant shift in topical

emphasis between 1997-2001 and 2002-2005 (Table 1). Because of small cell numbers for

decision-making techniques and IT applications, we placed them in the “others” category,

resulting in four topic categories: management control systems, cost accounting and

management, management accounting in general, and others. The test result indicates a

significant difference between the two periods (chi-square = 23.31, df = 3, p < 0.001). The

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difference is mainly due to there being more articles on target costing and responsibility

accounting in 1997-2001, and there being more articles on operating budgeting, performance

measurement (EVA), performance evaluation system (BSC), value chain analysis, and value-

based management in 2002-2005. ABC/ABM appears about equally frequently in both

periods.

III. Distribution of Research Methods

Table 2 shows that normative/conceptual papers dominate the sample (203, or 71.8

percent), followed in descending order by case studies (47, 16.6 percent), surveys (19, 6.7

percent), field-archival studies (12, 4.2 percent), and analytical modeling research (2, 0.7

percent).

[ Please insert Table 2 about here ]

Normative/Conceptual Research

Normative/conceptual papers provide comments, thoughts, and suggestions on

management accounting practices and research in China. These studies deal with the

environment of management accounting and control (MAC) application, the choice of MAC

techniques, the design of MAC systems, the functions of MAC systems, and the relationship

between MAC and corporate governance and internal control. Articles of this type are

primarily based on authors’ personal observations or experience, and occasionally also invoke

limited reviews of the prior literature. For example, J. L. Yang (1999) reviews the

development of management accounting practices in China from 1950 to the 1990s, and

emphasizes the influences of political, economic, and societal factors. Another researcher (X.

S. Yang, 1999) emphasizes that applications of management accounting are not equivalent to

performance effects of management accounting. He thus calls for more case studies to

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demonstrate successful applications of and uniqueness of management accounting practices.

Huang and Zhao (1999) envision the effects of economic transition on management

accounting in terms of basic assumptions, firm objectives, management methods and

procedures. Li and Ning (2000) argue that the relatively underdeveloped capital market and

low managerial mobility in China make it inappropriate to treat shareholders as the sole

evaluators of managers’ performance. Li et al. (2000) comment on the difference between

China and the West in the knowledge about the scope of management accounting, the content

of management accounting research (introduction of practices vs. theoretical inquiry), the

application of management accounting techniques (limited vs. comprehensive), and the

organization for management accountants (absence vs. existence of professional

organizations). Sun and Wu (2003) raise concerns about the applicability of EVA to China

due to, for example, differential degrees of capital market development and the education

required of top management. Xu (2000) also evaluates the environmental factors that may

constrain MAC applications in China. He argues that the lack of property rights protection

causes both principals and agents to lack sufficient incentives to adopt MAC in planning

enterprise resources. He identifies China’s legal system as being close to that of Continental

Europe in that accounting traditionally is governed by laws and regulations, and calls for the

establishment of MAC standards by government and academic bodies to provide a basis for

MAC application and research.

Among the articles focusing on the design, application and integration of MAC

systems and techniques, Li (1997) proposes taking a market perspective in choosing among a

number of MAC systems/techniques, including responsibility accounting, total cost

management, master budgeting and CVP. She maintains that the main problems of current

MAC practices include being too focused on internal control and neglecting the provision of

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information for managerial decision making; not targeting performance evaluation at the

highest level of management; and limiting adoption to only a small number of techniques.

Finally, she puts forth a list of factors to consider in choosing MAC practices: size,

management model (centralization and decentralization), firm development stage, system

design, and operating cost. Wang and Gao (2003) provide a conceptual analysis of the

relationship among organization design, management control system and financial power

arrangement. They contrast three organizational forms (U-form, M-form, and flat and matrix

structure), two main organizational systems (operations and financial) and three modes of

financial power arrangements: centralization, decentralization and delegation. In addition,

they consider factors that affect the choice of financial power arrangements: ownership and

board of directors structure, firm life cycle, transaction relatedness with divisions, and

incentives (the stronger, the more centralized.) Wang and Gao (2004) present a conceptual

framework in which different MAC techniques are suitable at different levels of corporate

management. Specifically, they assert that BSC is best suited for strategic decision

specification, ABC for organization and transaction design, budgeting for resource allocation

and process control, and EVA and BSC for management performance appraisal.

He (2004) conceptually examines the functions of MAC from a contracting theory

perspective. Viewing the firm as a bundle of contracts, the author argues that MAC

techniques should provide information on agent performance and contract fulfillment so as to

support the allocation of decision rights, contract renewal and choice of contract form,

thereby reducing agency costs.

Other normative/conceptual studies introduce and explain various management

accounting techniques including ABC/ABM, target costing, EVA, and BSC. By and large,

these articles simply “import” the Western practices by elaborating on details of the new

19
techniques and sometimes demonstrating the ideas by numerical or case examples (e.g.,

Zhang 1998; Wu and Gao 2001). Integration of multiple techniques (e.g., ABC and budgeting,

ABC and target costing, ABC and value chain management) seems to be the “value” added

by these studies when they explain a management accounting technique. In summary, both

“contrast-before-transfer” and “borrow-and-transfer” approaches appear in this category of

research (cf. Solomon and Shields 1995). Among these articles, ones that invoke theories to

support their arguments are the exception rather than the rule.

Case Study Research

The coverage of the 47 case studies encompasses virtually all of the management

accounting topics, including standard costing, operating budgets, performance measurement,

responsibility accounting, performance evaluation systems, performance-based compensation,

ABC/ABM, target costing, decision making, value chain analysis, and strategic management

accounting. These studies report on practices in a wide range of industries, including

electrical appliances, railroads, iron and steel, hotels, power plants, petroleum refining,

machinery, and fertilizer manufacturing. The Hangang experience is written about most often.

Most of the articles report on how a particular site had implemented the focal management

accounting techniques, and provide some details about the content of the practice; a small

number also report on the effects or consequences.

A particularly noteworthy feature of the case studies is that they contain quite a

number of action research reports. The following three examples illustrate the nature and

range of these reports. Wang et al. (1999) describe their experience with introducing ABC

into Xiann Agriculture Machinery Factory. They demonstrated that the traditional full costing

method was providing misleading information for decision making, undertook an activity

analysis of the company, and provided management with a number of proposed changes (e.g.,

20
reducing redundant staff, adopting a sales-led production and stock control system, reducing

non-value-adding activities, reorganizing cost control relations by establishing 14 activity

centers, identifying key activities, and reducing production preparation time). The authors

argue that ABC and ABM are equally applicable in the case company and similar companies

that produce a variety of machines with very different levels of production volume, a large

amount of manufacturing costs and direct labor costs.

Wang et al. (2000) report on their implementation of strategic cost management (SCM)

and ABC in EPW, a medium-sized state-owned company. They analyzed the company’s value

chain and identified numerous stages where improvements were possible. They also

undertook a cost driver analysis and helped the company to adopt an ABC system.

Furthermore, the research team helped the company to reposition its products and

competitive strategy. Through reporting this experience, the research team argues that both

SCM principles and ABC can be beneficial to state-owned-enterprises transitioning to private

ownership, with a precondition being that top management participates in cost management

from a standpoint of strategy and competition, rather than just relying on accountants to make

the changes.

Finally, Yang and Xu (2003) designed a performance measurement system for the

China TeleCom Group. Based on an analysis of the agency relationships in the group, the

authors found that there are very different expectations from different principals and agents,

and that there exist complex gaming relationships (cooperative and non-cooperative). These

findings led the authors to conclude that the performance measurements system must be

based on the goal of firm value maximization. Their proposed system consisted of a chain of

indicators which ended at the apex with EBITDA (earnings before interest, tax and

depreciation and amortization). The authors also argued for the adoption of subjective

21
approaches such as Delphi to assign weights to indicators, and suggested that the firm’s

budget be used as the primary basis for measuring performance.

In his treatise on conducting case studies, Yin (1987) suggests that this kind of

research is appropriate for answering “why” and “how” questions. When viewed in this light,

a shortfall of the studies in our sample is that they rarely address the “why” question. Even if

this scope limitation is overlooked, it still is of concern that the studies almost never discuss

the research procedures followed in gathering the information for the report, including those

for conducting interviews/visits (e.g., interviewer, interviewees, time period under

investigation, target departments, content of the questionnaires, frequency of interviews or

meetings, length of time per interview or meeting, verification of the transcripts, etc.) or the

source documents for key pieces of information (e.g., organization chart, annual report,

financial statements, cost reports, manuals, etc.). One of the few exceptions is an ABC case

study by Wang et al. (2000). The authors explicitly identify the target products and time

period under investigation. However, the difficulties and solutions that they report seem to

have come from the extant literature, as they are not tied to findings associated with the

research site. Similarly, Yu and Ni (1997) report on the use of responsibility cost management

in a fertilizer company. The procedures such as plant visit, interviews, meetings, and source

documents are reported but in this case, there is no discussion of why the company had

adopted the practice. This failure to address the “why” issue leaves open the question of

whether the adoption is beneficial to performance, or a reflection of following fashion or fads

or the company being under coercive pressures such as government influence (DiMaggio and

Powell 1983).14 In summary, although case studies seem to have established a foothold in

14. Li (1997) suggests that the high use of responsibility accounting in the 1980s is largely due to following
fashion and fads. He argues that the use of management accounting is a function of environmental (market
and technology), organizational, and internal process factors.

22
Chinese management accounting research, the method for conducting and reporting case

study research warrants further refinement.

Survey Research

Most of the 19 survey studies focus on the extent that a particular kind or set of

management accounting practice is in use (e.g., ABC or a range of management accounting

practices). A few ask questions about the relevance of management accounting information to

managerial decisions (Zhang and Zhang 1999), the potential value of a particular practice for

enhancing performance (He 1997; Yang et al. 2001) and the implementation procedures

(Chow et al. 2004). Yang et al. (2001) also obtain information on some aspects of

management accounting education and research. Somewhat departing from this mold, Hu and

Zheng (2000) survey the “Financial Square” column of Finance and Accounting in

1985-1999 and count the number of case reports for each management accounting practice.

Through such secondary data, they infer the pervasiveness of various management

accounting techniques/systems in practice, and the difficulties with the applications.

These survey studies have provided useful insights into the state of management

accounting practices in China, but when they are compared with studies on similar issues

published in the Western journals (e.g., Firth 1996; Chalos and O’Connor 2004; O’Connor et

al. 2004), a note on research methods seems necessary.15 While no study is free of

deficiencies, four aspects of the Chinese literature are particularly in need of note. The first

point relates to providing information about the sample. A description of how the sample

firms and respondents are selected and the profiles of the final sample are important for

understanding the findings’ reliability and generalizability. Yet such details are customarily

omitted from the survey studies we examined. To illustrate the importance of this information,

15. See Chow et al. (2007) for a review of Chinese-based surveys and some recent findings on practice.

23
consider the study by Yang et al. (2001) which asked controllers to answer questions about

research. While the authors are to be lauded for providing information about their

respondents, there is room to question whether controllers would have the required expertise

or knowledge to make the required assessments. It would not have been possible to raise this

concern if the authors had not revealed the functional roles of their respondents. The second

issue of concern is non-response bias. Typically, survey studies only obtain responses from a

fraction of the target sample. This is especially likely for a society like that of China, with its

relatively recent transition towards an open economy. When only a small proportion of the

surveys is returned, there is considerable likelihood that there are systematic differences

(other than in the variables of interest) between those who reply and those who do not. Such

differences could bias the results, yet none of the studies we examined conducted tests for

non-response bias, though a few presented response rates (e.g., Lin and Wu 1998; Nanjing

Group 2001). Third is design of the instrument. The fact that none of the survey-based paper

provides the instrument makes it difficult to judge their quality. Referring to prior studies for

developing questionnaires, conducting pilot tests for assuring the instrument’s

understandability, and assessing the instrument’s reliability and validity are all important for

assuring that the findings will be meaningful. Although some of the reviewed studies make

references to prior research in developing the instrument (e.g., Chow et al. 2004; Meng et al.

1997), none explicitly assesses instrument reliability or validity. Finally, none of the studies

provides research hypotheses or conducts statistical testing. Meng et al. (1997), for example,

provides reasons for the low use of management accounting in the sample, but neither states

hypotheses ex ante nor conducts formal statistical tests ex post on the relationship between

the suggested reasons and the degrees of application. Similarly, the discussion in Yang et al.

(2001) implies that firm size and location are related to the extent of management accounting

24
applications, but no ex ante reasoning for the association is provided; nor is there ex post

statistical testing.

Field-Archival Research

Compared to the numbers of case and survey studies, the number of field-archival

studies (12) is relatively low. By and large, these studies simply replicate those in the West.

Most use publicly obtainable data from listed companies to examine the (1) determinants of

executive compensation, and (2) value relevance of various performance measures. In

examining the first issue, firm performance and variables associated with corporate

governance such as ownership structure, size, and structure of the board of directors (BoD)

are included as explanatory variables. Relating to the second issue, performance measures

such as earnings per share, EVA, residual income, cash flow from operations, and even the

performance measures promulgated in the government’s State-Owned Capital Performance

Evaluation System are compared with each other in their value relevance. Stock pricing

models and stock return models, and both level and change analyses are used.

In general, these studies have the strengths of being theory-based and being attentive

to the econometric issues in data analysis. Still, some omit information on how the final

sample was derived. They also tend not to disclose how the authors had calculated the

performance measures that are not directly available. Finally, in relying on extant theories

and methods from the West, the authors often neglect unique features of the Chinese setting.

For example, in addition to having a BoD like companies in the U.S. and U.K., Chinese firms

also have a supervisory board. Yet only the size and structure of the BoD are included in the

studies that we reviewed.

Analytical Modeling Research

We found only two analytical modeling studies. One proposes a workshop activity

25
optimization model under ABC and applies this to data obtained from a real life company

(Zhang et al. 2002). The other applies the Nash bargaining solution to propose a transfer

pricing model in which incentives are given to individual production departments while

maximizing the benefit of the firms as a whole (Wang et al. 2001). There is no doubt that

many opportunities remain for this type of research.

Comparing the Distribution of Research Methods between 1997-2001 and 2002-2005

Table 2 indicates that 72.5 percent of the articles in 1997-2001 are normative/

conceptual in nature, 15 percent are case studies, 10 percent are surveys, 1.7 percent are

field-archival studies, and 0.8 percent is analytical modeling research. The corresponding

proportions for the 2002-2005 period are 71.2 percent, 17.8 percent, 4.3 percent, 6.1 percent,

and 0.6 percent, respectively. Thus, the proportions for both case and field-archival research

have increased while those for normative/conceptual and survey research have decreased.

Due to small cell numbers, we excluded analytical modeling research and conducted a

chi-square test on the distribution of research methods between the two periods. The result

supports our inkling of a significant difference between the two periods (chi-square = 6.95, df

= 3, p < 0.07).16

IV. Distribution of Research Settings

Given the high proportion of conceptual/normative papers in the mix, it is not

surprising that a great majority of papers (219, 77.4 percent) deal with generic settings rather

than focusing on a particular industry (Table 3). Table 3 shows that among the 64 articles that

do focus on specific industries or settings, a wide range of industries are covered, with iron

and steel, conglomerates, and petroleum companies receiving relatively more attention. The

16. Even though most topics are amenable to multiple research methods, we found that there was a systematic
relationship between the articles’ research topics and methods (chi-square = 28.30, df = 9, p < 0.001).

26
attention to enterprises in the iron and steel industry (13 articles) can be attributed to the

prominence of the Hangang experience.

[ Please insert Table 3 about here ]

Comparing the 1997-2001 and 2002-2005 periods, there is a noticeable decline in

the proportion of articles using generic settings (from 83.3 percent to 71.2 percent). The chi-

square test shows that there is a significant difference in the proportions of generic vs.

specific industry settings between the two periods (chi-square = 5.66, df = 1, p < 0.02).

Within the articles with an industry focus, coverage of both conglomerate enterprises and the

petroleum industry are noticeably higher in the more recent period (from two to nine, and

from one to six articles, respectively). The variety of industries covered in the 2002-2005

period also is increased.

V. Application of Theory

In categorizing the theoretical underpinnings of the articles, we grouped extant

theories into economics, finance, psychology, organizational behavior, strategy, and

production and operation management. Each study not explicitly mentioning any theory was

examined for implicit theoretical underpinnings. If such underpinnings were detected, then

the study was classified as applying the theory (or theories) thus identified. For example,

EVA studies were classified as applying theories in finance and research on the determinants

of executive compensation are classified as applying agency theory unless they specified

otherwise. Articles claiming that management accounting practice should reflect

environmental, cultural, and other factors are classified as applying contingency theory even

if the latter was not explicitly mentioned.

Even with this rather lenient approach, 226, or 79.9 percent of the papers still fell into

the “no theory applied” category (Table 4). Among the remaining 57 articles classified as

27
being theory-based, 23 apply finance theories, primarily due to the large number of articles

dealing with EVA, cash value added, and value-based management. Economic theories are

applied by 17 papers primarily due to research on performance measurement and

compensation (i.e., agency theory). Six papers apply theories of strategy, and another six

papers apply organizational behavior theories (i.e., contingency theory). Theories in

psychology, production and operations management, and statistics are each applied by no

more than two papers.

[ Please insert Table 4 about here ]

Comparing the Use of Theories between 1997-2001 and 2002-2005

Table 4 indicates that the proportion of articles lacking theoretical underpinnings was

86.7 percent in 1997-2001 as compared to 74.8 percent in 2002-2005. This drop in

non-theory-based articles seems to be quite substantial, and its statistical significance is

supported in a proportions test between the two periods (chi-square = 6.00, df = 1, p < 0.02).

As to the theories that are applied in the two periods, it seems that uses of theories in

economics, finance and strategy are increasing, though small cell sizes precluded a formal

statistical test.

VI. Overlap with Topics of Importance to Managers

Four major possibilities exist regarding the overlap between research and business

managers’ concerns. One is the absence of a relationship—managers and management

accounting researchers are operating in separate spheres like ships passing each other in the

night. A second possibility is practice leading research. A third possibility is that the two are

synchronized. Finally, research can be ahead of practice in terms of time.

To explore which of these scenarios is applicable in the Chinese setting, we collected

Chinese executives’ opinions on the management accounting topics that were most important

28
to their firms in the past five years, and at present or in the near future. This survey was

conducted in late 2004 as part of a large scale survey on Chinese firms’ management

accounting practices. The study obtained open-ended responses from senior executives of 225

medium to large listed Chinese companies.17 Table 5 lists, in descending order, the topics

most-often mentioned by the managers as being most important to their firms in the past five

years, and at present or in the near future.18 This table also distributes the 283 articles in our

sample across these topics.

[ Please insert Table 5 about here ]

Three points should be noted before examining Table 5. First, because the managers’

answers to the open-ended questions used varied terms and phrases, terms had to be

developed judgmentally for aggregating their responses.19 In turn, lack of perfect overlap

between the managers’ classifications of management accounting topics and those used in our

preceding tables causes the assignment of articles to topics in Table 5 to deviate somewhat

from these other tables. Second, because the managers’ assessments were collected in late

2004, we treated 1997-2003 as corresponding to the past five years at the point of their

assessment, and 2004-2005 as representing “currently and in the near future.” Third, since not

all topics have equal “massiveness” of content, the number of articles on a topic, per se, may

not be a complete indication of its research intensity.

First consider Panel A of Table 5, which focuses on managers’ top concerns in the past

five years. It shows that the top four concerns all have double-digit article coverage in

17. Details of the study are reported in XXXX (citation omitted at this stage to facilitate anonymous review of
this article).
18. Since our review only considered management accounting articles and omitted ones in finance/financial
management, we left out of Table 5 “finance and investment,” which was ranked fifth for the past five years
and third for “currently and in the near future.” None of the articles in our sample covered this topic.
19. Two of the co-authors read through all of the open-ended responses independently and developed the set of
terms. Then these were integrated via discussion (the divergence was minor). The managers’ responses were
then assigned among the resulting set of terms.

29
1997-2003, even though the relative proportions do not follow this ordering. For example, the

top concern, “budget management,” is the subject of 16 articles, whereas the second-ranked

concern, “performance evaluation/measures,” is the topic of 37 published articles. In contrast,

there are only 3 articles on the fifth-ranked “capital budgeting decisions.”

Panel B shows some change in the managers’ list of most important topics in the past

five years as compared to currently and in the near future. While the top two topics remain

the same, “use of information and communication technology” replaces “cost

management/control” as the third-most important issue, with the latter dropping to a tie at

fifth place with a new topic, “value chain analysis.” Responsibility accounting continues at

the fourth rank.

The distribution of articles from 1997-2003 suggests that the Chinese management

accounting researchers may have only partially anticipated the developing needs in practice.

There is an absence of articles on use of information and communications technology, and

only two articles deal with value chain analysis. Two articles do appear on the former topic in

2004-2005, and eight on value chain analysis. While the data are not in a form conducive to

formal statistical analysis, the conclusion seems warranted that Chinese management

accounting research has kept pace with the managers’ concerns but not particularly led

practice.

VII. Summary and Overall Assessment

By providing an overview of 283 management accounting articles published in 18

major Chinese academic journals in the 1997-2005 period, this study has aimed to provide

external, non-Chinese reading individuals with a general understanding of this literature to

supplement the information in English sources. It also has sought to identify possible

directions for developing and refining Chinese management accounting research. The latter

30
could assist Chinese scholars and their foreign colleagues to identify collaborative

opportunities.

Judging from the content of the 283 articles, recent management accounting research

in China has primarily been concerned with introducing and explaining “new” management

accounting systems and techniques (e.g., ABC/ABM, EVA, and BSC). Writers of articles

often take advantage of China’s late mover role to propose the possibility of integrating

multiple practices. They also borrow from the experiences from outside of China to provide

guidance or suggestions on implementation. In this process, some attention has been devoted

to identifying the unique features of management accounting in China (e.g., the economic

responsibility system, internal bank and the Hangang experience). Effort also has been

devoted to disseminating information about experiences with management accounting via

case studies.

But despite the rather large number of articles comprising this literature, it is not yet a

sufficient basis for understanding or guiding Chinese management accounting practices.

While the many normative/conceptual articles probably contain useful insight, the lack of

theoretical underpinnings and empirical validation makes it difficult to evaluate, aggregate,

and choose among them. Survey, case and field-archival studies could, conceptually, assist in

this process. However, methodological weaknesses and omissions (e.g., lack of disclosures

about the sample and procedures, failure to assess non-response bias or the validity of survey

questions), in conjunction with the wide scattering of research settings (Table 3), limit the

ability to assemble a reliable or generalizable body of knowledge.

Yet there also are signs of promise. It is encouraging that armchair theorizing is on the

decline. We also note the increased application of theory in more recent studies, reduced use

of generic settings, and researchers’ apparent awareness of topics that are important to

31
managers. Both casual observation and the number of action research-based papers in our

sample suggest that there is a corps of Chinese academics with an active interest in providing

managerial consultancy. Their access to firms, combined with their consulting experiences,

should give these academics considerable knowledge of current practices and challenges. By

increasing their application of theory and sophisticated methodology—either by themselves

or in collaboration with others with different skill sets—these academics should be able to

increase the relevance and reliability of their insights.

To ensure successful development in this direction, Chinese management accounting

researchers need to have solid grounding in the base disciplines (e.g., economics, psychology)

as well as research methods. In strengthening themselves along these fronts, China’s

management accounting researchers will do well to look beyond the accounting discipline, as

much of (management) accounting research relies on theories from other areas, such as

economics, psychology, and sociology (Shields 1997; Hopper et al. 2001). There also is room

to increase the variety of methods that they use. Among the empirical studies in our sample,

the most popular approaches are case studies and survey studies.20 Both methods have

relative strengths and weaknesses (Birnberg et al. 1990). For example, case studies are well

suited for in-depth understanding of phenomena, including the nature of processes, and

questions of “how” and “why” (Yin 1987). However, because of their time requirement, they

often are based on very small samples, and thus have limited statistical power for identifying

the effects of individual factors. While surveys facilitate assembling data on a large sample,

they have limited capacity to explore phenomena in depth or to identify causal relationships.

They also may be limited by respondents' lack of knowledge, biases in respondents'

20. In this regard, we suspect that the total absence of experimental studies and the near nonexistence of
analytical studies is a symptom that current researchers lack training of sufficient breadth and depth.

32
perceptions of reality, faulty or selective recall, or intentionally biased representations. Other

empirical methods also have weaknesses to go with their strengths. For example, controlled

experiments are particularly strong for understanding causal relationships among a small set

of variables. But this strength comes at the price of not being able to simultaneously consider

a rich set of variables. Rather than dispersing attention over non-overlapping settings to

create a “thin” layer of findings that cannot be cross-validated, Chinese management

accounting research might consider applying multiple methods (‘method triangulation’) to

study a limited number of issues or settings.

As part of their learning process, the Chinese management accounting research

community is likely to consult the more established Western literature and scholars for

guidance. In this regard, it is important that scholars working in China be alert to the different

theoretical and methodological orientations of North American researchers and those from

the European (especially the UK) tradition (Scapens 2004; Hesford et al. 2007; Luft and

Shields 2007). On the theoretical front, the former are mainly economics-driven, while the

latter are more open to behavioral, organizational, psychological, and sociological theories.

Methodologically, North American researchers tend to follow a functionalist/positive

approach and use analytical, archival and experimentation methods, whereas management

scholars from the European tradition prefer interpretative, critical, and fieldwork methods

such as surveys, case studies, and participation observation (Maher 2001; Hopper et al. 2001).

Merchant et al. (2003) have elaborated the disadvantages of adopting a single theoretical

perspective and the potential gains from adopting multiple perspectives in management

accounting research. We strongly second their view, and encourage our Chinese colleagues to

maintain an open mind towards all sources of theories and methods.

Turning to the scope of management accounting research, we find the existence of

33
articles on cutting-edge topics (e.g., externally oriented management accounting,

environmental accounting) to be another promising sign. In addition to continuing such work

and exploring topics that extant research has overlooked, there is room for revisiting prior

topics using more sophisticated methodology. It is worth exploring, for example, the factors

that affect Chinese firms’ use and non-use of different management accounting techniques,

how management accounting complements or substitutes for other aspects of management

(e.g., human resource management practices), factors that may mediate or moderate the

effects of management accounting, and, via longitudinal studies, how these variables interact

across time. It also is interesting and important to identify unique management accounting

and control practices or ways by which common management accounting and controls are

applied in China that are different from those found in other contexts.

To enhance management accounting research, it is important to have a critical mass of

well-trained researchers. It is encouraging that some China universities have recruited an

increasing number of Chinese Ph.D. students graduating from foreign universities where

research is more advanced. Some of these have demonstrated skills and capabilities of

conducting rigorous research. Some universities had also started to invite Western and

Chinese scholars to give intensive courses or workshops. While these initiatives are useful, it

is most important that Chinese universities provide research students with rigorous

methodological and theoretical training. At present, we observe that many Chinese

accounting masters’ or PhD programs are based on a traditional master-prentice model,

giving little emphasis on formal methodological and theoretical training.

Like research in other areas or disciplines, research in management accounting and

control is affected by institutional settings. Overall the institutional settings for management

accounting research have been improving. Given that management accounting and control

34
research is not well-developed in China and given the shortage of trained researchers, it is

perhaps useful for Chinese universities to encourage and facilitate collaboration between

Chinese scholars and foreign scholars. Academic associations and professional bodies also

have a role to play in enhancing management accounting and control research, e.g., by

providing research funding and organizing conferences and workshops.

To conclude, the opening of China’s markets, along with managers’ increased

autonomy, makes China a fertile setting for management accounting research. Our review

suggests that there is abundant opportunity for Chinese researchers, alone or in collaboration

with their foreign counterparts, to advance understanding of practice, lead practice

development, and test theories in this increasingly important economy.

35
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 TABLE 1
Distribution of Articles amongst Research Topics
Total # of
Topic 1997-2001 2002-2005 articles
1 Management control systems 42 (35) 91 (55.8) 133 (47.0)
1.1 Standard costing 4 1 5
1.2 Operating budgets 8 36 44
1.3 Performance measurement 14 33 47
1.4 Transfer pricing 2 1 3
1.5 Responsibility accounting 11 2 13
1.6 Performance evaluation system 1 10 11
1.7 Performance-based compensation 2 8 10
2 Cost accounting and management 36 (30) 33 (20.2) 69 (24.4)
2.1 ABC/ABM 14 17 31
2.2 Target costing 9 1 10
2.3 Environmental accounting 4 5 9
2.4 Cost accounting and management in general 9 10 19
3 Decision- making techniques 3 (2.5) 4 (2.5) 7 (2.5)
3.1 Capital budgeting 1 3 4
3.2 Cost-volume-profit analysis 2 1 3
4 Management accounting in general 25 (20.8) 9 (5.5) 34 (12.0)
4.1 General issues 18 7 25
4.2 Survey of practice 7 2 9
5 Externally oriented management accounting 8 (6.7) 11 (6.8) 19 (6.7)
5.1 Value chain analysis 2 8 10
5.2 Strategic management accounting 6 3 9
6 Information technology applications 0 (0) 2 (1.2) 2 (0.7)
7 Others 6 (5) 13 (8.0) 19 (6.7)
7.1 Value-based management 1 7 8
7.2 Others 5 6 11
Total 120 (100) 163 (100) 283 (100)
Figures in parentheses are percentages.

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 TABLE 2
Distribution of Articles amongst Research Methods
Total # of
Method 1997- 2001 2002- 2005
articles
Normative/Conceptual 87 (72.5) 116 (71.2) 203 (71.8)
Case study 18 (15) 29 (17.8) 47 (16.6)
Survey 12 (10) 7 (4.3) 19 (6.7)
Field-archival 2 (1.7) 10 (6.1) 12 (4.2)
Analytical modeling 1 (0.8) 1 (0.6) 2 (0.7)
Total 120 (100) 163 (100) 283 (100)
Figures in parentheses are percentages.

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 TABLE 3
Distribution of Articles amongst Settings
Setting 1997- 2001 2002- 2005 Total # of articles
Generic 100 116 216
Iron and steel 5 8 13
Conglomerate enterprises 2 9 11
Petroleum 1 6 7
Power plant 2 2 4
Railroad 3 1 4
Automobile 0 3 3
Banking 1 2 3
Air industry 0 2 2
Distribution industry 0 2 2
E-commerce 0 2 2
Electric devices 1 1 2
Machinery 1 1 2
Construction 0 1 1
Fertilizer industry 1 0 1
High-tech 0 1 1
Hotel 1 0 1
Internet 1 0 1
Real estate 0 1 1
Research & development 0 1 1
Telecommunications 0 1 1
Non- profit 1 3 4
Total 120 163 283

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 TABLE 4
Application of Theory
Theory 1997- 2001 2002- 2005 Total # of articles
No theory applied or detected 104 (86.7) 122 (74.8) 226 (79.9)
Economics 5 (4.2) 12 (7.4) 17 (6.0)
Finance 3 (2.5) 20 (12.3) 23 (8.1)
Psychology 0 (0) 2 (1.2) 2 (0.7)
Organizational behavior 6 (5.0) 1 (0.6) 7 (2.4)
Statistics 0 (0) 1 (0.6) 1 (0.4)
Production and operations management 1 (0.8) 0 (0) 1 (0.4)
Strategy 1 (0.8) 5 (3.1) 6 (2.1)
Total 120 (100) 163 (100) 283 (100)
Figures in parentheses are percentages.

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 TABLE 5
Correspondence between Managers’ Most Important Management Accounting
Issues and Published Research

Panel A: Managers’ Top Five Issues in Past Five Years

1997-2003
Number of articles (% of 175 total articles published
Managers’ Top Issues in this period)
Budget management 16 9.1%
Performance evaluation/measures 37 21.1%
Cost management/control 26 14.9%
Responsibility accounting 13 7.4%
Capital spending decisions 3 1.7%

Panel B: Managers’ Top Five Issues Currently and in the Near Future
2004-2005
1997-2003 Number of articles (% of 108
Number of articles (% of 175 total total articles published in this
Managers’ Top Issues articles published in this period) period)
Budget management 16 9.1% 28 25.9%

Performance
37 21.1% 21 19.4%
evaluation/measures

Use of information and

-- 2 1.9%
communications technology

Responsibility accounting 13 7.4% --

Cost management/control 26 14.9% 16 14.8%
Value chain analysis 2 1.1% 8 7.4%

Budget management includes all topics concerning operating budgeting. Research topics included in
performance evaluation/measures are performance measurement (EVA and other measures), and performance
evaluation systems such as BSC. Research topics under the cost management/control heading include standard
costing, cost accounting and management in general, environmental accounting and strategic management
accounting. Since ABC/ABM and target costing are listed separately by the managers in the survey, research
topics about ABC/ABM and target costing are not included in cost management/control.

45