Magazine article Financial Management (UK)

Thinking: Why More Research Is Required to Investigate Value Creation in Management Accounting

Magazine article Financial Management (UK)

Thinking: Why More Research Is Required to Investigate Value Creation in Management Accounting

Article excerpt

Although the term "value creation" made its debut in the mid-1980s, it still doesn't have one universally accepted definition. People's understanding of the concept depends on the context in which it's used. It may refer to the content (what is valuable, who values what and where value resides) or to the process (how value is created). In business, it is commonly linked to a company's relationships with its shareholders and customers. As such, the creation of value for shareholders and customers has been central to most of the research conducted in this area.

Firms that have maximised customer satisfaction and shareholder wealth by developing cost-effective ways to provide useful products and services have been widely seen as successes. But the fact that cases of unethical corporate behaviour keep emerging suggests that a better model of value creation, which ensures that other stakeholders' interests are ranked just as highly, is needed. A philosophy that embraces financial, social and environmental wellness (as espoused in the recent report co-published by CIMA, "Accounting for natural capital: the elephant in the boardroom") should be the foundation for a new paradigm of comprehensive value creation. This new paradigm should merge business with the context in which it exists.

Numerous studies have provided evidence about the positive contribution of management accounting tools with regard to organisational planning, control and performance improvement. But there has been little research in the field of management accounting that considers the new paradigm of value creation. As management accounting contributes to the creation of value as a strategic concept, the value created by management accounting practices should lead a business towards economic success while also addressing its social and environmental objectives. …

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