Academic journal article Journal of Performance Management

Management Accounting in Spanish Savings Banks. an Empirical Investigation

Academic journal article Journal of Performance Management

Management Accounting in Spanish Savings Banks. an Empirical Investigation

Article excerpt

Summary

The Spanish banking sector has experienced large-scale transformations throughout the last decade as a consequence of factors such as: deregulation, disintermediation, innovation, and the European Monetary Union. Faced with these changes, banks have been forced to redesign their strategies and reorganize their structures in order to meet the new conditions of competition. It must be determined, however, if the accounting information systems for the management of these organizations have been adapted to these new competitive conditions. This investigation tries to evaluate the management accounting systems in Spanish savings banks. In order to do this, an empirical investigation has been carried out which has reviewed the different components of management accounting systems, both the traditional systems and those using the most recent developments in that area. This has enabled us to identify limitations and propose the most ideal characteristics of management accounting for these companies.

Key Words

JEL CODE: M41 (accounting); G21 (banks; other depository institutions).

Introduction

The Spanish banking sector has experienced profound changes during the last two decades as a consequence of factors such as deregulation, disintermediation, financial innovation and the setting up of the European Monetary Union. In light of these changes, banking companies have been forced to redesign their strategies and reorganize their structures in order to face the new competitive conditions. It must be determined, however, whether the accounting information systems for the management of these organizations have been adapted to the new information requirements. This investigation tries to empirically evaluate the current characteristics of management accounting systems in Spanish banking organizations which operate in the global retail banking sector under the legal title of savings banks. In order to do this, an empirical investigation has been carried out using a questionnaire, sent to the financial control managers of Spanish savings banks. The questionnaire asked them to review the different components of their management accounting systems, such as: the mechanisms for assigning funds to cost objects and the transfer pricing used to determine the financial margin per cost object; the characteristics of cost systems (partial or complete, historical or standard) or the budget processes and procedures used.

However, the limitations of "traditional" management accounting systems are well known. Factors such as short-term focus, an emphasis on financial aspects, difficulties in treating indirect costs, the lack of relation to the company's strategic objectives or an excessive emphasis on central control are limitations which currently make the use of management accounting tools in financial control more difficult.

For this reason, we have also evaluated how much Spanish savings banks know about the most recent developments in the sector, and to what degree they employ them as a tool for overcoming the problems caused by more conventional systems and facilitating the adaptation of management accounting systems to the new competitive demands in the sector. We have analyzed the use of instruments such as:

indicators of a non-financial nature and balanced scorecards; costs systems based on activities; equity assignation systems to objects of analysis and evaluation of profitability adjusted to risk in these cases.

The main contributions of this empirical investigation are: to explain the characteristics of the financial control systems which saving banks are using in the Spanish retail bank sector, while identifying their limitations and lack of adaptation to the competitive conditions of the sector and proposing more appropriate characteristics for management accounting systems for companies.

The evolution of the banking sector in Spain.

In this section we give an overall view of the evolution and changes that the Spanish banking system has experienced over the past two decades. …

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