Finance business partnering and manufacturing firms’ performance: a mediating role of non-financial performance
Abstract
The effect of finance business partnering (FBP) implementation on the firm performance remains largely unexplored. The main aims of this study are to investigate whether there is a significant effect between FBP and firm performance and to identify the mediating effect of non-financial performance between FBP and firm performance. A questionnaire-based survey was conducted among 117 Chinese manufacturing firms in the year 2018, and research hypotheses were tested by partial least squares structural equation modelling (PLS-SEM). The findings showed that 1) FBP does not exert a significant and direct effect on the firms’ financial performance, 2) when non-financial measures (employees performance, internal process performance, and market performance) are used as mediating variables, the effect of all the three mediating variables on the relationship between FBP and non-financial variables are positive and significant. However, when the relationship between non-financial measures and firm’s performance is considered, the mediating effect of the non- financial variables is positive and significant only for the market performance. This study provides, for the first time, empirical evidence that non-financial performance, such as employee skills, internal processes, and market performance, can be enhanced by considering FBP. It also provides practical implications suggesting that manufacturing firms should motivate finance staff to be involved in various decision-making processes.
Keyword : finance business partnering, manufacturing firms, financial performance, non-financial performance, survey, China
How to Cite
Zhang, Y. F. ., Namazi, M. ., Guo, Y. Q. ., & Li , X. . (2020). Finance business partnering and manufacturing firms’ performance: a mediating role of non-financial performance. Journal of Business Economics and Management, 21(2), 473-496. https://doi.org/10.3846/jbem.2020.12002
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Chenhall, R. H. (2003). Management control systems design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society, 28(2), 127–168. https://doi.org/10.1016/S0361-3682(01)00027-7
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Emsley, D. (2005). Restructuring the management accounting function: A note on the effect of role involvement on innovativeness. Management Accounting Research, 16(2), 157–177. https://doi.org/10.1016/j.mar.2005.02.002
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Flanagan, A., & Grant, N. (2013). Finance business partner turning heads. Accountancy Ireland, 45(3), 47–49.
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Hair, J. F., Ringle, C. M., & Sarstedt, M. (2014). Partial least squares structural equation modeling: Rigorous applications, better results and higher acceptance. Long Range Planning, 46(1), 1–12. https://doi.org/10.1016/j.lrp.2013.01.001
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Hoozée, S., & Bruggeman, W. (2010). Identifying operational improvements during the design process of a time-driven ABC system: The role of collective worker participation and leadership style. Management Accounting Research, 21(3), 185–198. https://doi.org/10.1016/j.mar.2010.01.003
Hoozée, S., & Ngo, Q.-H. (2017). The impact of managers’ participation in costing system design on their perceived contributions to process improvement. European Accounting Review, 27(4), 747– 770. https://doi.org/10.1080/09638180.2017.1375417
Hussain, N., Rigoni, U., & Orij, R. P. (2018). Corporate governance and sustainability performance: Analysis of tripe bottom line performance. Journal of Business Ethics, 149(2), 411–432. https://doi.org/10.1007/s10551-016-3099-5
Indjejikian, R. J., & Mateˇjka, M. (2006). Organizational slack in decentralized firms: The role of business unit controllers. The Accounting Review, 81(4), 849–872. https://doi.org/10.2308/accr.2006.81.4.849
Innes, J., Mitchell, F., & Sinclair, D. (2000). Activity-based costing in the U.K’s largest companies: A comparison of 1994 and 1999 survey results. Management Accounting Research, 11(3), 349–362. https://doi.org/10.1006/mare.2000.0135
Ittner, C. D. (2002). The association between activity-based costing and manufacturing performance. Journal of Accounting Research, 40(3), 711–726. https://doi.org/10.1111/1475-679X.00068
Ittner, C. D., & Larcker, D. F. (1997). The performance effects of process management techniques. Management Science, 43(4), 522–534. https://doi.org/10.1287/mnsc.43.4.522
Iyibildiren, M., & Karasioglu, F. (2018). Balanced scorecard in business performance measurement and its effect on financial structure. Global Journal of Management and Business Research Finance, 18(2), 13–21.
Jarvenpaa, M. (2007). Making business partners: A case study on how management accounting culture was changed AU. European Accounting Review, 16(1), 99–142. https://doi.org/10.1080/09638180701265903
Kallunki, J.-P., Laitinen, E. K., & Silvola, H. (2011). Impact of enterprise resource planning systems on management control systems and firm performance. International Journal of Accounting Information Systems, 12(1), 20–39. https://doi.org/10.1016/j.accinf.2010.02.001
Kamilah, A., & Zabri, S. M. (2016). The effect of non-financial performance measurement system on firm performance. International Journal of Economics and Financial Issues, 6(S6), 50–54.
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard University Press.
Kennedy, T., & Affleck-Graves, J. (2001). The impact of activity-based costing techniques on firm performance. Journal of Management Accounting Research, 13(1), 19–45. https://doi.org/10.2308/jmar.2001.13.1.19
Kuye, O., & Sulaimon, A.-H. (2011). Employee involvement in decision making and firms performance in the manufacturing sector in Nigeria. Serbian Journal of Management, 6(1), 1–15. https://doi.org/10.5937/sjm1101001K
Lau, C. M., & Oger, B. (2011). Non-financial performance measures on employee behaviours. Centre for Pacific Basin Business, Economics, and Finance Research, Airiti Press.
Lee, L., Petter, S., Fayard, D., & Robinson, S. (2011). On the use of partial least squares path modelling in accounting research. International Journal of Accounting Information Systems, 12(4), 305–328. https://doi.org/10.1016/j.accinf.2011.05.002
Lopez-Valeiras, E., Gomez-Conde, J., & Lunkes, R. J. (2018). Employee reactions to the use of management control systems in hospitals: Motivation vs. threat. Gaceta Sanitaria, 32(2), 129–134. https://doi.org/10.1016/j.gaceta.2016.12.003
McAdam, R., Miller, K., & McSorley, C. (2019). Towards a contingency theory perspective of quality management in enabling strategic alignment. International Journal of Production Economics, 207, 195–209. https://doi.org/10.1016/j.ijpe.2016.07.003
Messner, M. (2016). Does industry matter? How industry context shapes management accounting practice. Management Accounting Research, 31, 103–111. https://doi.org/10.1016/j.mar.2015.09.001
Mia, L., & Clarke, B. (1999). Market competition, management accounting systems and business unit performance. Management Accounting Research, 10(2), 137–158. https://doi.org/10.1006/mare.1998.0097
Mjongwana, A., & Kamala, P. N. (2018). Non-financial performance measurement by small and medium sized enterprise operating in the hotel industry in the city of Cape Town. African Journal of Hospitality, Tourism and Leisure, 7(1), 1–26.
Mourad, S., & Valette-Florence, P. (2016). Improving prediction with POS and PLS consistent estimations: An illustration. Journal of Business Research, 69(10), 4675–4684. https://doi.org/10.1016/j.jbusres.2016.03.057
Namazi, M., & Namazi, N.-R. (2016). Conceptual analysis of moderator and mediator variables in business research. Procedia Economics and Finance, 36, 540–554. https://doi.org/10.1016/S2212-5671(16)30064-8
Nunnally, J. C. (1978). Psychometric theory. McGraw-Hill.
Pallant, J. (2001). SPSS survival manual-astep by step guide to data analysis. Open University Press.
Ribau, C. P., Moreira, A. C., & Raposo, M. (2017). SMEs innovation capabilities and export performance: An entrepreneurial orientation view. Journal of Business Economics and Management, 18(5), 920–934. https://doi.org/10.3846/16111699.2017.1352534
Shields, M. (1995). An empirical analysis of firms’ implementation experiences with activity-based costing. Journal of Management Accounting Research, 7, 148–161.
Sun, W., Zhao, C., & Cho, C. H. (2019). Institutional transitions and the role of financial performance in CSR reporting. Corporate Social Responsibility and Environmental Management, 26(2), 367–376. https://doi.org/10.1002/csr.1688
Yuliansyah, Y., & Ahmad Razimi, M. S. (2015). Non-financialperformance measures and managerial performance: The mediation role ofinnovation in an Indonesian stock exchange-listed organization. Problems and Perspectives in Management, 13(4), 135–144.
Zhang, Y. F., Namazi, M., & Isa, C. R. (2017). Investigating the empirical effect of ABC stages on the performance of companies. Iranian Journal of Management Studies, 10(1), 175–205. https://doi.org/10.22059/IJMS.2017.216695.672286
Zoni, L., & Merchant, K. A. (2007). Controller involvement in management: an empirical study in large Italian corporations. Journal of Accounting & Organizational Change, 3(1), 29–43. https://doi.org/10.1108/18325910710732849
Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182. https://doi.org/10.1037/0022-3514.51.6.1173
Banker, R. D., Bardhan, I. R., & Chen, T.-Y. (2008). The role of manufacturing practices in mediating the impact of activity-based costing on plant performance. Accounting, Organizations and Society, 33(1), 1–19. https://doi.org/10.1016/j.aos.2006.12.001
Bjornenak, T. (1997). Diffusion and accounting: The case of ABC in Norway. Management Accounting Research, 8(1), 3–17. https://doi.org/10.1006/mare.1996.0031
Burns, J., & Baldvinsdottir, G. (2005). An institutional perspective of accountants’ new roles – the interplay of contradictions and praxis. European Accounting Review, 14(4), 725–757. https://doi.org/10.1080/09638180500194171
Cagwin, D., & Bouwman, M. (2002). The association between activity-based costing and improvement in financial performance. Management Accounting Research, 13(1), 1–39. https://doi.org/10.1006/mare.2001.0175
Chartered Global Management Accountant. (2015). Finance business partnering: The conversations that count (CGMA Report, pp. 1–23).
Chenhall, R. H. (2003). Management control systems design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society, 28(2), 127–168. https://doi.org/10.1016/S0361-3682(01)00027-7
Chenhall, R. H., & Langfield-Smith, K. (1998). The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach. Accounting, Organizations and Society, 23(3), 243–264. https://doi.org/10.1016/S0361-3682(97)00024-X
Churchill, G. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16(1), 64–73. http://doi.org/10.2307/3150876
Ciftci, I., Tatoglu, E., Wood, G., Demirbag, M., & Zaim, S. (2019). Corporate governance and firm performance in emerging markets: Evidence from Turkey. International Business Review, 28(1), 90–103. https://doi.org/10.1016/j.ibusrev.2018.08.004
Davila, A., & Venkatachalam, M. (2004). The relevance of non-financial performance measures for CEO compensation: Evidence from the airline industry. Review of Accounting Studies, 9, 443–464. https://doi.org/10.1007/s11142-004-7792-8
Davis, S., & Albright, T. (2004). An investigation of the effect of Balanced Scorecard implementation on financial performance. Management Accounting Research, 15(2), 135–153. https://doi.org/10.1016/j.mar.2003.11.001
Duréndez, A., Ruíz-Palomo, D., García-Pérez-de-Lema, D., & Diéguez-Soto, J. (2016). Management control systems and performance in small and medium family firms. European Journal of Family Business, 6(1), 10–20. https://doi.org/10.1016/j.ejfb.2016.05.001
Emsley, D. (2005). Restructuring the management accounting function: A note on the effect of role involvement on innovativeness. Management Accounting Research, 16(2), 157–177. https://doi.org/10.1016/j.mar.2005.02.002
Fisher, J. (1995). Contingency-based research on management control systems: Categorization by level of complexity. Journal of Accounting Research, 14, 24–53.
Flanagan, A., & Grant, N. (2013). Finance business partner turning heads. Accountancy Ireland, 45(3), 47–49.
Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement errors: Algebra and statistics. Journal of Marketing, 18(3), 382–388. https://doi.org/10.1177/002224378101800313
Global Management Accounting Principles (GMAP). (2016). Effective management accounting improving decisions and building successful organizations (pp. 1–54).
Gosselin, M. (1997). The effect of strategy and organizational structure on the adoption and implementation of activity-based costing. Accounting, Organizations and Society, 22(2), 105–122. https://doi.org/10.1016/S0361-3682(96)00031-1
Graham, A., Davey-Evans, S., & Toon, I. (2012). The developing role of the financial controller: Evidence from the UK. Journal of Applied Accounting Research, 13(1), 71–78. https://doi.org/10.1108/09675421211231934
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (2006). Multivariate data analysis (6th ed.). Prentice Hall.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A primer on partial least squares structural equation modeling (PLS-SEM) (2nd ed.). Sage. https://doi.org/10.15358/9783800653614
Hair, J. F., Ringle, C. M., & Sarstedt, M. (2014). Partial least squares structural equation modeling: Rigorous applications, better results and higher acceptance. Long Range Planning, 46(1), 1–12. https://doi.org/10.1016/j.lrp.2013.01.001
Hasan, I., Kobeissi, N., Liu, L., & Wang, H. (2018). Corporate social responsibility and firm financial performance: The mediating role of productivity. Journal of Business Ethics, 149(3), 671–688. https://doi.org/10.1007/s10551-016-3066-1
Hoozée, S., & Bruggeman, W. (2010). Identifying operational improvements during the design process of a time-driven ABC system: The role of collective worker participation and leadership style. Management Accounting Research, 21(3), 185–198. https://doi.org/10.1016/j.mar.2010.01.003
Hoozée, S., & Ngo, Q.-H. (2017). The impact of managers’ participation in costing system design on their perceived contributions to process improvement. European Accounting Review, 27(4), 747– 770. https://doi.org/10.1080/09638180.2017.1375417
Hussain, N., Rigoni, U., & Orij, R. P. (2018). Corporate governance and sustainability performance: Analysis of tripe bottom line performance. Journal of Business Ethics, 149(2), 411–432. https://doi.org/10.1007/s10551-016-3099-5
Indjejikian, R. J., & Mateˇjka, M. (2006). Organizational slack in decentralized firms: The role of business unit controllers. The Accounting Review, 81(4), 849–872. https://doi.org/10.2308/accr.2006.81.4.849
Innes, J., Mitchell, F., & Sinclair, D. (2000). Activity-based costing in the U.K’s largest companies: A comparison of 1994 and 1999 survey results. Management Accounting Research, 11(3), 349–362. https://doi.org/10.1006/mare.2000.0135
Ittner, C. D. (2002). The association between activity-based costing and manufacturing performance. Journal of Accounting Research, 40(3), 711–726. https://doi.org/10.1111/1475-679X.00068
Ittner, C. D., & Larcker, D. F. (1997). The performance effects of process management techniques. Management Science, 43(4), 522–534. https://doi.org/10.1287/mnsc.43.4.522
Iyibildiren, M., & Karasioglu, F. (2018). Balanced scorecard in business performance measurement and its effect on financial structure. Global Journal of Management and Business Research Finance, 18(2), 13–21.
Jarvenpaa, M. (2007). Making business partners: A case study on how management accounting culture was changed AU. European Accounting Review, 16(1), 99–142. https://doi.org/10.1080/09638180701265903
Kallunki, J.-P., Laitinen, E. K., & Silvola, H. (2011). Impact of enterprise resource planning systems on management control systems and firm performance. International Journal of Accounting Information Systems, 12(1), 20–39. https://doi.org/10.1016/j.accinf.2010.02.001
Kamilah, A., & Zabri, S. M. (2016). The effect of non-financial performance measurement system on firm performance. International Journal of Economics and Financial Issues, 6(S6), 50–54.
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard University Press.
Kennedy, T., & Affleck-Graves, J. (2001). The impact of activity-based costing techniques on firm performance. Journal of Management Accounting Research, 13(1), 19–45. https://doi.org/10.2308/jmar.2001.13.1.19
Kuye, O., & Sulaimon, A.-H. (2011). Employee involvement in decision making and firms performance in the manufacturing sector in Nigeria. Serbian Journal of Management, 6(1), 1–15. https://doi.org/10.5937/sjm1101001K
Lau, C. M., & Oger, B. (2011). Non-financial performance measures on employee behaviours. Centre for Pacific Basin Business, Economics, and Finance Research, Airiti Press.
Lee, L., Petter, S., Fayard, D., & Robinson, S. (2011). On the use of partial least squares path modelling in accounting research. International Journal of Accounting Information Systems, 12(4), 305–328. https://doi.org/10.1016/j.accinf.2011.05.002
Lopez-Valeiras, E., Gomez-Conde, J., & Lunkes, R. J. (2018). Employee reactions to the use of management control systems in hospitals: Motivation vs. threat. Gaceta Sanitaria, 32(2), 129–134. https://doi.org/10.1016/j.gaceta.2016.12.003
McAdam, R., Miller, K., & McSorley, C. (2019). Towards a contingency theory perspective of quality management in enabling strategic alignment. International Journal of Production Economics, 207, 195–209. https://doi.org/10.1016/j.ijpe.2016.07.003
Messner, M. (2016). Does industry matter? How industry context shapes management accounting practice. Management Accounting Research, 31, 103–111. https://doi.org/10.1016/j.mar.2015.09.001
Mia, L., & Clarke, B. (1999). Market competition, management accounting systems and business unit performance. Management Accounting Research, 10(2), 137–158. https://doi.org/10.1006/mare.1998.0097
Mjongwana, A., & Kamala, P. N. (2018). Non-financial performance measurement by small and medium sized enterprise operating in the hotel industry in the city of Cape Town. African Journal of Hospitality, Tourism and Leisure, 7(1), 1–26.
Mourad, S., & Valette-Florence, P. (2016). Improving prediction with POS and PLS consistent estimations: An illustration. Journal of Business Research, 69(10), 4675–4684. https://doi.org/10.1016/j.jbusres.2016.03.057
Namazi, M., & Namazi, N.-R. (2016). Conceptual analysis of moderator and mediator variables in business research. Procedia Economics and Finance, 36, 540–554. https://doi.org/10.1016/S2212-5671(16)30064-8
Nunnally, J. C. (1978). Psychometric theory. McGraw-Hill.
Pallant, J. (2001). SPSS survival manual-astep by step guide to data analysis. Open University Press.
Ribau, C. P., Moreira, A. C., & Raposo, M. (2017). SMEs innovation capabilities and export performance: An entrepreneurial orientation view. Journal of Business Economics and Management, 18(5), 920–934. https://doi.org/10.3846/16111699.2017.1352534
Shields, M. (1995). An empirical analysis of firms’ implementation experiences with activity-based costing. Journal of Management Accounting Research, 7, 148–161.
Sun, W., Zhao, C., & Cho, C. H. (2019). Institutional transitions and the role of financial performance in CSR reporting. Corporate Social Responsibility and Environmental Management, 26(2), 367–376. https://doi.org/10.1002/csr.1688
Yuliansyah, Y., & Ahmad Razimi, M. S. (2015). Non-financialperformance measures and managerial performance: The mediation role ofinnovation in an Indonesian stock exchange-listed organization. Problems and Perspectives in Management, 13(4), 135–144.
Zhang, Y. F., Namazi, M., & Isa, C. R. (2017). Investigating the empirical effect of ABC stages on the performance of companies. Iranian Journal of Management Studies, 10(1), 175–205. https://doi.org/10.22059/IJMS.2017.216695.672286
Zoni, L., & Merchant, K. A. (2007). Controller involvement in management: an empirical study in large Italian corporations. Journal of Accounting & Organizational Change, 3(1), 29–43. https://doi.org/10.1108/18325910710732849