Management Accounting Practices and Financial Performance of Public Sugar Manufacturing Firms in Lake Region Economic Block, Kenya

Abstract

Sugarcane is one of the industrial crops of Kenya. The sugar industry in Kenya has made a major contribution to the development of the nation. Despite its key importance to the economy, it has continued to perform dismally leading to persistent deficits in production hence government interventions. The primary challenge that Kenya's sugar sector is currently facing is a long-term decline in profitability, which is compromising financial performance. The Kenyan sugar industry continues to be threatened by regional and global factors. The industry is also highly inefficient and is only able to survive as a result of high tariff and non-tariff protection. The cost of sugar production in Kenya exceeds the global average. The overall objective of this study was to investigate the effect of management accounting practices on financial performance of Public Sugar Manufacturing firms in Lake Region Economic Block, Kenya. Specific Objectives are to investigate the effect of cost accounting management practice, budgetary accounting management practice and performance evaluation accounting practice and to identify the moderating effect of firm size on the relationship between management accounting practices and financial performance of Public Sugar Manufacturing firms in Lake Region Economic Block, Kenya. The study was guided by accountability theory, Transaction cost theory and contingency theory of management accounting. The study used causal research design .Target population of 143 comprising of accountants, auditors and managers. This study sampled 98 respondents constituting of management accountants, auditors and general managers. Stratified random sampling technique was used. This study used questionnaires for primary data collecting. Secondary data was sought for firm size and financial performance for 2018 2022 financial years from published financial statements through secondary data collection tool. Data analysis was done using descriptive statistics thus frequencies and percentages and inferential statistics thus Pearson correlation and simple linear regression analysis. Data was presented using tables. The study found significant effect (t-statistic=7.324, p-value=0.000< 0.05) of cost accounting management practice on financial performance. Budgetary accounting management practice had a significant effect (t-statistic=7.181, p-value=0.000<0.05) on financial performance as performance evaluation accounting practice had a significant effect (t-statistic=6.773, p value=0.000<0.05) on financial performance of Public Sugar Manufacturing firms in Lake Region Economic Block, Kenya. This led to rejection of the null hypothesis. Finally, there was a moderating effect of firm size on the relationship between management accounting practices and financial performance of Public Sugar Manufacturing firms in Lake Region Economic Block, Kenya(p<0.05) hence rejected the null hypothesis. Public Sugar Manufacturing firms in Lake Region Economic Block should practice standard costing, target costing , activity based costing and life cycle costing measures so as to improve cost accounting management practice. Public Sugar Manufacturing firms in Lake Region Economic Block should design budgetary estimates, implement budgetary planning process, avail budget allocations, expenditures and ensure timely budget approvals so as to improve performance. Public Sugar Manufacturing firms in Lake Region Economic Block should streamline the internal audits and external audits for easier performance evaluation. The study recommends growth of assets for the firm so as to enable a significant influence on performance.