Privatization and Management Accounting Systems Change: The Case of the 19th Century Spanish Tobacco Monopoly
Macias, Marta, The Accounting Historians Journal
Vangermeersch Manuscript Award Winner, 2001
Abstract: This paper examines changes to the accounting system of the Spanish tobacco monopoly in 1887, following the decision by the state to lease the publicly owned and state-run monopoly to a privatesector company. The switch to private-sector management generated a fundamental change in the demands made of the accounting system. As a result, double-entry bookkeeping and a new method of calculating costs were implemented. The paper discusses the motives behind the design of the new accounting system and its consequences using the framework provided by agency theory. It highlights the need to consider the role of the capital structure of the firm and the state as explanatory factors for both the parameters and uses of cost accounting information.
Contributions addressing the emergence of cost accounting practices in organizations have provided important insights into the broader processes involved in the production of accounting information. Competitive pressures [e.g., Johnson and Kaplan, 1987; Edwards and Newell, 1991; Fleischman and Parker, 1991, 1997], enforcement of disciplinary practices [e.g., Hoskin and Macve, 1986, 1988], and the quest for greater labor productivity [Hopper and Armstrong, 1991] have been highlighted as underpinning the development of cost management systems. Much of this research has focused on Anglo-American settings characterized by strong, competitive environments. In spite of several contributions on the role of government agency [e.g., Ezzamel et al., 1990; Tyson, 1993], evidence about the nature of and motives behind such practices in other contexts is still needed. This paper, by examining the privatization of the Spanish tobacco monopoly in 1887, will explore the impact of ownership structure on management accounting systems. This privatization did not entail changes either in the competitive environment or in the productive technology used by the industry, allowing us to isolate the influence of the shift from public to private ownership on such practices. Archival evidence was gathered from three primary sources. The Archive of the Tobacco Company (Archivo de Historico de la Fabrica de Tabacos de Sevilla, AHFTS) and the Intermediate Archive of the Tobacco Company (Archivo Intermedio de la Fabrica de Tabacos de Sevilla) constitute comprehensive sources for understanding internal developments at the tobacco factory. In addition, the Bank of Spain houses the Archive of the Bank of Spain (Archivo Historico del Banco de Espana, AHBE), which is essential for investigating the privatization of the tobacco monopoly.
In recent times, the Spanish tobacco monopoly has been extensively studied. Carmona et al.  examined from a Foucauldian perspective the implementation by 1773 of a cost accounting system. They showed cost calculations to be part of a strong disciplinary regime that enhanced visibility and served to establish a system of calculability that rendered human accountability visible. Carmona et al.  used an institutional theory framework to explain changes to financial and cost accounting practices throughout the period from 1760 to 1790. They concluded that new accounting practices emerged as a means of enhancing the external legitimacy of the organization. Carmona and Macias  studied the implementation of budgets and cost accounting procedures in the period from 1820 to 1887. They focused on the state's motivation in exerting institutional pressures aimed at the implementation of early cost management practices and studied different organizational responses to simultaneous pressures arising from a single institutional source. In the period analyzed in all these papers, the monopoly was publicly owned and state-run. Finally, Macias  explored determinants of accounting disclosure by analyzing the evolution of corporate financial reporting throughout the first leasing contract (1887-1896). …