Decentralization, perceived environmental uncertainty, managerial performance and management accounting system information in Egyptian hospitals

• Date: 21 October 2013
• Pages: 314-330
• DOI: https://doi.org/10.1108/IJAIM-02-2012-0005
• Published date: 21 October 2013
• Author: Salah A. Hammad,Ruzita Jusoh,Imam Ghozali
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

Decentralization, perceived

environmental uncertainty,

managerial performance

and management accounting

system information

in Egyptian hospitals

Salah A. Hammad

Accounting Department, Faculty of Commerce,

University of Tanta, Tanta, Egypt

Ruzita Jusoh

Department of Management Accounting & Taxation,

University of Malaya, Kuala Lumpur, Malaysia, and

Imam Ghozali

Faculty of Economics, Deponegoro University, Deponegoro, Indonesia

Abstract

Purpose – The purpose of this paper is to provide empirical evidence concerning: the relationships

between decentralization, perceived environmental uncertainty, and management accounting systems

(MAS) information and the relationships between MAS information and managerial performance

within Egyptian hospitals.

Design/methodology/approach – Data were collected using questionnaires that were sent

personally to the managers or heads of departments of Egyptian hospitals. Departmental level was

used as the unit of analysis. Data obtained from 200 hospital managers were analyzed using partial

least squares.

Findings – The study reveals that decentralization and environmental uncertainty, to some extent,

are essential factors in designing eff‌icient and effective MAS. Hospitals with decentralized structure

make better use of timely, aggregated and integrated MAS information. Environment in which the

hospitals operate does have signif‌icant inf‌luence on the type of information provided by the MAS.

Research limitations/implications – Using personally administered questionnaires causes the

sample to be rather limited and not comprehensive enough.

Practical implications – The current study offers the hospital managers some useful aspects

related to the function of MAS information that can be used to enhance their managerial performance.

The provision of broad-scope and timeliness of MAS information can facilitate more effective

managerial decisions. MAS designers and Egyptian policy makers should emphasize on decentralized

decision-making by delegating suff‌icient authority to lower level managers as much as possible.

Originality/value – This study is one of the few studies done in Africa in the f‌ield of MAS,

particularly in the context of Egyptian hospitals.

Keywords Egypt, Hospital,Management accounting system, Decentralization,

Perceived environmental uncertainty,Managerial performance

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1834-7649.htm

Received 23 February 2012

Revised 25 April 2012

30 June 2012

29 October 2012

23 November 2012

13 December 2012

Accepted 13 December 2012

International Journal of Accounting

and Information Management

Vol. 21 No. 4, 2013

pp. 314-330

qEmerald Group Publishing Limited

1834-7649

DOI 10.1108/IJAIM-02-2012-0005

IJAIM

21,4

314

1. Introduction

In the last few decades, the healthcare sector has grown rapidly. As a result, more

attention has been paid by citizens and the government to healthcare services and

their providers with the aim of achieving higher service quality, lower costs, and

better performance. Since hospitals must provide higher service quality and lower

costs for large numbers of patients in order to survive, they have to maintain

rigorous control over their operations (Ramsey, 1994). In addition, governments

are compelled to focus on assessing and improving hospital eff‌iciency due to the

increasing trend in health spending (Watcharasriroj and Tang, 2004). To measure

and improve the eff‌iciency of healthcare organizations, particularly hospitals,

a comprehensive and effective management information system is deemed necessary

in today’s dynamic and competitive environment. Information systems such as

management and cost accounting must be able to support basic control processes

and increase organizational effectiveness and eff‌iciency (Kettelhut, 1992).

Within the context of hospitals, a study by Pizzini (2006) has shown that

management and cost accounting information plays an important role. In a similar

vein, Jones and Mellett (2007) argue that accounting has always been par t of

healthcare, where the philosophy now underpinning accounting has moved from being

customized and inward-looking, through being control-based, to being market-base d.

Further, Lehtonen (2007) suggests that successful implementation of new accounting

and control systems in the healthcare sector requires integrated clinical and f‌inancial

accountability, assignment of responsibility to clinicians, freedom in choosing

appropriate control tools, and f‌lexibility in adoption.

To address the importance of management accounting information in the hospital

context, the current study focuses on four information characteristics of management

accounting systems (MAS) design: scope, timeliness, aggregation, and integration

(Chenhall and Morris, 1986). Managerstend to perceive these informationcharacteristics

to be useful in facilitatingdecision-making (Chenhalland Morris, 1986; Mangaliso, 1995).

The contingency theory contends that the design and use of control systems are

contingent uponthe context of the organizational setting in which these controls operate

and function (Fisher, 1995; Otley, 1980). In line with this theory, the current study aims

to investigate how contextual variables, such as organizational structure and

environmental uncertainty, inf‌luence the design of MAS information characteristics,

and how these characteristics, in turn, inf‌luence the performance of Egyptian hospital

managers.

It is worth mentioning some general background information about the Egyptian

healthcare system in order to provide context. The system is considered highly

pluralistic and complex (Hammad et al., 2010; Rannan-Eliya et al., 1997). In fact, many

healthcare systems in developing countries are poorly managed. This is evident from

the 2009 report by the World Health Organization (WHO), which stated that:

[...] health policies and strategies are not supported by evidence, regulatory mechanisms are

not well developed, health system remains highly centralized, and coordination within the

Ministry of Health and Population (MOHP) and with other related agencies and ministries

remains weak (Hammad et al., 2010, p. 764).

As a result,the MOHP took the initiativeto reform and reorganizethe Egyptian healthcare

system in terms of eff‌iciency,quality, and equity improvements so that it is in line with

the development of new public management (NPM) carried out in other developed

MAS information

in Egyptian

hospitals

315