Management Accounting in Less Developed Countries: Review

The current issue and full text archive of this journal is available at www.emeraldinsight.com/0951-3574.htm Management accounting in less developed countries: what is known and needs knowing Trevor Hopper Manchester Business School, University of Manchester, Manchester, UK Mathew Tsamenyi University of Birmingham, Birmingham, UK Management accounting 469 Received 27 January 2008 Revised 3 July 2008 Accepted 11 September 2008 Shahzad Uddin University of Essex, Colchester, UK, and Danture Wickramasinghe Manchester Business School, University of Manchester, Manchester, UK Abstract Purpose – The purpose of this paper is to evaluate management accounting research in developing countries and formulate suggestions for its progression. Design/methodology/approach – This is a desk based study of existing literature analysed through a framework of management control transformation in developing countries derived from the authors’ research. Findings – Research is growing, especially on accounting in state-owned and privatised enterprises but more is needed on small and micro enterprises, agriculture, non-governmental organisations, and transnational institutions. Originality/value – This is the first review of this area and thus should help intending and existing scholars. Keywords Management accounting, Developing countries, Poverty, Privatization Paper type Literature review Introduction Research on accounting in less developed countries (LDCs) has grown over the past 20 years. This is welcome for its previous neglect rendered the accounting needs of poor people who constitute most of the world’s population as marginal and esoteric despite their concerns being as pressing – if not more so – as in rich countries. Moreover, LDCs form part of the mosaic of world trade and rich countries can learn from them, e.g. on poverty reduction and reconciling ethnic tensions. The growth of LDC research may be attributable to increased globalization of capital markets and competition; structural adjustment programmes of development finance institutions; newer less Western-centric accounting journals; the diaspora of accounting scholars from LDCs to rich countries; and Western PhD programs that encourage candidates to The authors wish to thank the Research Foundation of the Chartered Institute of Management Accountants for funding that made this paper possible. Accounting, Auditing & Accountability Journal Vol. 22 No. 3, 2009 pp. 469-514 q Emerald Group Publishing Limited 0951-3574 DOI 10.1108/09513570910945697 AAAJ 22,3 470 conduct indigenous research. However, most research is on financial accounting. This is unfortunate as management accounting systems (MAS) play an important role within development:, e.g. central planning requires iterative budgeting between state organs and enterprises, and current market-based policies are predicated upon private interests fostering more efficient controls. Moreover, MASs bear directly on development issues like governance, planning, employment and quality of life but their enactment is problematic: local politics and cultures can transform them into tools of coercion or external legitimacy rather than rational control and democratic accountability. Apart from editorial introductions summarising special editions of journals (Alawattage et al., 2007; Hopper and Hoque, 2004) no review of MAS research in LDCs exists. Previous reviews, notably Jaggi (1973), Samuels (1990), Wallace (1990), Needles (1994, 1997), and Rahaman et al. (1997) focus on financial accounting but touch on MAS issues[1]. This leaves potential MAS researchers ignorant of previous empirical conclusions, and debates over policy, practice and theory. Hence the motivation for this paper, which endeavours to voice to LDC concerns, stimulate interest in the area, and debate how MASs might better serve humanitarian development. The paper has three broad aims. First, it categorises MAS research by country, stage of development, topic, methods and theory to track its themes to date. Second, based on the authors’ work mainly in Bangladesh, Ghana and Sri Lanka, it outlines a framework of MAS transition from colonial times to today. Third, this is used to analyse discoveries to date and future research needs. The paper ends with conclusions. MAS research by country, stage of development, topic, theory and research methods Our definition of MAS embraces processes, structures and information for organisational decisions, governance, control and accountability. ;It is deliberately broad – too narrow and technical definitions deflect attention from historical, social, political and economic factors, and their unanticipated consequences. Rigid boundaries are dangerous as development issues need open, imaginative, problem-based approaches that transgress disciplines and forms of accounting. We excluded financial accounting papers on LDCs, including social and environmental accounting ones (see Gray and Kouhy, 1993) but in retrospect such demarcations may be dangerous, as will be discussed. The journals searched covered Abacus; Accounting, Auditing, and Accountability Journal; Accounting and Business Research; Accounting, Organizations, and Society; Accounting Review; Advances in International Accounting; British Accounting Review; Critical Perspectives on Accounting; Journal of Accounting Research; Journal of Business Finance and Accounting; International Journal of Accounting; Journal of International Financial Management; Journal of Accounting and Organisational Change; Journal of Management Accounting Research; Management Accounting Research; Qualitative Research in Accounting and Management; and Research in Third World Accounting (now Research in Accounting in Emerging Economies). Other known relevant papers were included. However, much MAS research lies untapped in non-Western and non-English research outlets, especially reports by national and transnational governmental bodies and aid agencies[2], and journals in development studies, public administration, and management. Defining a LDC is fraught and problematic: poverty may not universal within a country and development rates vary, can be discontinuous, and poverty is not unique to LDCs. Nevertheless, a LDC is characterised by low rates of per capita income, capital formation and value added. Development is not merely an economic phenomenon but includes environmental degradation, child welfare, quality of life, citizen empowerment, and governance. Despite debates on what constitutes development (Rao, 1991; Munck and O’Hearn, 1999), the United Nations’ and World Bank indices have particular currency. This review examines research on countries within the World Bank lower to upper middle income bands[3]. This covers a wide span of incomes but enabled us to cover a broad range of LDCs, including ones that have moved into higher income bands. World Bank indices are cruder than UN ones but our categorisation included all countries in categories (a) and (b) of the UN HPI[4]. However, ex-communist countries in transition were excluded [see special issue of Management Accounting Research (2002, Vol. 13 No. 4) and Research on Accounting in Emerging Economies (supplement 2, 2004)] as they are often relatively affluent, may lie within Western political and economic systems, and have a legacy of Western institutions under revival. Had papers from poorer, ex-communist countries like Albania or Kazakhstan been found they would have been included. However, we included China (excluding Hong Kong) as it still contains considerable poverty, has grown from a low economic base, is non-Western, and has material apposite to other LDCs. Nevertheless, MAS issues in LDCs and transitional economies bear similarities, so this review may contain insights for the latter. In total 75 empirical papers from 29 countries (11 African, eight Asian, two Pacific, six Latin American/Caribbean, and two Middle-East) fell within our remit. Appendix 1 details their extensive geographical spread across countries though only China has sustained research. Papers on countries within World Bank low and lower-middle income bands were more prevalent than on upper-middle income countries (see Table I). Appendix 2 classifies these papers by research topic. It reveals a preoccupation with control in SOEs and privatisation (full or partial). Papers were not classified between SOEs and privatised companies because often they overlapped both. This is understandable given the initial dominance of state led development based on industrialisation through SOEs, and subsequent turns to market oriented policies involving privatisations. However, the few papers on multi-national organisations (MNOs) and large indigenous companies were a surprise. Whether this was due to the journal search parameters or negligible MAS problems (unlikely given our review later) is unknown. More papers on MAS in central and local government may have WB GNI bands for all countries (234) Low income (53) Lower-middle income (55) Upper-middle income (41) High-income (85) Unclassified – global Countries with MAS research papers (29) Papers per income band (75) 10 10 7 0 n/a 25 36 9 0 3 Management accounting 471 Table I. MAS papers across World Bank gross national income bands AAAJ 22,3 472 materialised had public administration and development studies journals been searched. The small number of papers on agriculture; non governmental organisations (NGOs); indigenous companies, especially small and medium sized enterprises (SMEs); and micro-organisations including households, domestic industry, sole traders, and peasant agriculture was disappointing though work is emerging. Classifying papers by research methods (see Appendix 3) revealed a strong preference for case studies (47) rather than quantitative statistical work (19). Of the latter, 8 incorporated fieldwork, normally interviews, usually to inductively derive key variables for testing rather than relying on research instruments derived from developed countries. Such studies have identified distinctive sources of uncertainty in LDCs and their effects (see Alam, 1997; Hoque (1995); Hoque and Hopper (1994); Kattan et al., 2007; O’Connor et al., 2006). The 47 case studies were not differentiated further as they frequently triangulated data and methods. Interviews and documentary analysis were the most common methods. Observational, participation observation, and action studies were scarce: only one experiential study was found – significantly from a World Bank consultant researcher. This reflects the poor dialogue between accounting researchers and development practitioners, unlike that in development studies. Case studies have been innovative, e.g. Davie’s (n.d.) ethnography of accounting in Fiji, and Kim (n.d.) on contemporary feminist and postcolonial writings criticising oral history. The desk and documentary studies category contains 10 heterogeneous papers ranging from literature reviews to studies of documentation and reports, normally from government and aid agencies (vital but neglected information sources despite their practice or policy hue). Appendix 4 shows many papers (19) had no explicit central theory, being problem-based, pragmatic or reviews. Only 3 were based in economics and 2 in development economics/studies, and then only loosely so. There was a smattering of social psychology papers with little commonality: 12 followed accounting and performance measurement (RAPM) and contingency theory research, and another 6 combined these with institutional theory. Two followed public administration traditions. Grounded/ethnographic/hermeneutic studies (26) of cultures and MASs predominated, perhaps because of desires to accord indigenous beliefs and social structures due respect in the face of the agendas and rationalities of political reformers. Some researchers treat the latter as objects of study using Bourdieu, Foucault or structuration theory to examine whether ideologies of accountability in official documents match the legitimate interests of locals. This gives an indigenous voice, challenges the hegemony of powerful external institutions, and scrutinises their policy documents. However, research exclusively based on discourse and texts can fail to connect this to practices and resistance (hence the need for grounded studies), and may downplay the effects of socio-economic structures. Hence the preference for some researchers (including the authors) for political economy approaches that combine grounded and institutional data, employ iterative theorising, and emphasise the dialectical interplay of the objective and subjective. A cultural political economy framework Like Wallace (1990) the authors’ have not found different accounting techniques in rich and poor countries, or that LDCs import grossly inappropriate practices. No MASs unique to LDCs been found, though they may exist, especially in traditional sectors. Most problems lie in the interplay of MASs and their cultural, economic and political context. Poverty brings distinctive uncertainties, e.g. exposure to the elements, undiversified economies, and a dominant (but not necessarily effective) state. Rich countries have shaped politics and policies in LDCs from colonialism, and today international aid institutions’ prescriptions often include (or presume) MASs framed in institutional contexts and rationalities not invariably found within LDCs. But many LDCs depend on external finance and cannot ignore its providers’ strictures. Thus when Western MASs are applied they often assume unanticipated roles or are ignored. Hence the framework for evaluating MAS research in Table II relates a dialectic explanation of MAS transformation to social, economic, and political factors in both ideational and institutional domains. Its breadth permits analysis of the theoretically and empirically diverse papers under scrutiny, whilst being in sympathy with dominant theoretical approaches, including our own. We do not claim it is conclusive, definitive or unique to LDCs – it is for analysis, understanding, and promoting dialogue, especially amongst targeted beneficiaries, not theoretical closure[5]. But it is difficult to avoid ethnocentricity or a normative stance for development entails changes from the status quo and humanitarian ideals that supersede cultural relativism. For exposition purposes the framework is presumed to embrace all LDCs (it was derived mainly in African and Asian ex-British colonies). It draws from the labour process approach in Uddin and Hopper (2001) and the “cultural political economy” in Wickramasinghe and Hopper (2005) and Wickramasinghe et al. (2004). It identifies five regimes: colonial despotism, state capitalism, politicised state capitalism, market capitalism, and politicised market capitalism (see Table II). Each epoch is brought about by force, manipulation, persuasion, and authority in political and economic struggles framed by interplays between key dimensions of each epoch – modes of production (MOP), culture, ethnicity and race, the state, regulation and the law, political parties, industrial relations, and international finance. These are defined below. The economic activities and social relations when people transform objects into useful things constitute a MOP. They range from feudalism to contemporary capitalism. Their effects extend beyond work relationships to cultural beliefs and politics (Taylor, 1979). However, behaviour is governed not just by economics but also a mix of knowledge, belief, art, morals, law, and custom known as culture – the “state or habit of mind” that underpins a “way of life” of a group or community, their outlook on the world, and their “general reaction to a general and major change in the conditions of our common life” (Williams, 1958). Ethnic groups often claim cultural distinctiveness due to divergent languages, religions, occupations, politics, and geographical demarcations (Haralambos, 1974). Sometimes this has overtones of race (classifying people by physical appearance, e.g. facial characteristics, skin colour). Ethnic claims may or not be empirically justifiable, whereas racial claims are not (Richardson and Lambert, 1985) but both can be sources of social identity and political mobilisation to influence the state (Efferin and Hopper, 2007). States include the armed forces, civil service, judiciary, and local and national elected bodies but boundaries are difficult to draw (e.g. they can co-opt religious organisations and trade unions). States have the authority to establish rules that govern a geographically determined population (Faulks, 1999). They control the means of violence in society. They may use force and coercion but normally seek consensus, exerting power through laws – often Management accounting 473 State, regulation and law Mode of production Culture Colonial despotism (Actual regime) Non-capitalist agricultural and domestic production. Small capitalist merchant/and owner class Colonial capitalist enterprises in primary sector Divide and rule Company states Mainly tactics based on Minimal state traditional, regulation ethnicity ethnocentric Closed and stable communities State capitalism (Ideal regime) Industrialisation Capitalist accumulation by SOEs Fair distribution Continuation of small merchants and traditional agricultural production Closed economy Economic Bureaucratic Nationalism Growth of development based emphasised not state central modernistic, on industrialisation planning ethnicity urban cultures Legal-rational incorporating authority rational progress, Intervention and science and welfare oriented education, Strong regulation meritocracy, and individualism account-ability to and nuclear Parliament family Politicised state capitalism (Actual regime) State extraction of surplus Hegemony of political criteria in commercial and production decisions Power with political elite linked to trade unions Distribution follows power and patronage Cultural fragmentation and diversity More open and less stable sub-cultures Increased urbanisation alongside strong traditional cultures Divisions heightened Ethnicity partly basis of party and political organisation Legal-rational structures of regulation maintained but captured or ignored by politicians State patronage, often for party advantage Weak enforcement Politics Imperialism Factional and volatile Often charismatic/dynastic leaders of parties rather than ideological Sometimes non-democratic Production and state politics often converge TU and labour markets International finance and capital market TUs illegal and weak Weak labour markets Nascent unionism and state regulation of industrial relations TUs recognised Growth of collective bargaining on industry basis Colonial capital. Otherwise minimal capital No capital market Powerful political party unions Multi-unionism Top down leadership Leaders from political elite TU membership and power in public enterprises Weak politicised, and poorly regulated capital markets Bank failures Fiscal crises of state lead to aid dependency and reliance on IMF/WB External financing often for Cold War reasons State banking Central bank regulation Emerging but weak capital market Deficit financing for development AAAJ 22,3 474 Table II. Regimes of control in ex-colonial LDCs: contextual factors and MASs Ethnicity and race MASs Coercive control based on racial and ethnic differences involving physical violence Accounting for HQ regulations and control Bureaucratic rational-legal accounting Enterprise budgeting within national central state planning Creation of formal wage bargaining and internal labour markets Accounting for external legitimacy Ritual ceremonial practices only MAS irrelevant for internal controls Decisions for day-to-day activities captured by political players (continued) Ethnicity and race State, regulation and law Reduced state power, supply side economic role Oriented to attract multinational and international capital Stronger capital market and regulation, especially of utilities Regulatory capture by political-economic elites Weak enforcement Decisions politicised Mode of production Culture Market capitalism (Ideal regime) Market-based exchange relations and distribution Private ownership of enterprises New public sector management Greater individualism and individual economic self-betterment Consumerism and materialistic choice Considered irrelevant. Politicised market capitalism (Actual regime) Domination of capital over labour Wider income differentials Fractions of capital, ownership diffuse/financial institutions/multinationals/local families Crony capitalism Mediation of “modern” market cultures with traditional and political Often the basis of political and social decisions Politics TU and labour markets International finance and capital market MASs Democratic and transparent government Strong external labour markets Weakened Trade Unions Decline in industry-wide collective bargaining Lowered employee protection Globalised capital Export zones Stronger capital markets Greater financial regulation and enforcement Lessened political intervention Market based controls Contemporary Western best practice Tight production targets Economic performance measurement External reporting for capital markets Democratic parties based on charismatic leaders from socio-economic elites Faction-alism based on regions, religion and ethnicity Segmented labour markets between core and periphery Trade unions co-opted into political parties Lower labour protection a power External financial agents especially IMF/WB strong influences on policy Family/crony capitalism alongside more multinational capital Politicised regulation and privatisation. Private accounts, top-down physical budgets Return of coercive control but no physical violence Weak compliance of external regulations – financial and non-financial Toothless trade unions with low bargaining power Internal sub-contracting Management accounting 475 Table II. AAAJ 22,3 476 delegated to regulatory institutions. State policies vary: usually they are instruments of dominant elites but their interests and preferences may vary (Jessop, 1982). Access to government resides in politics, be it in a legal-rational democracy, kingdom, or dictatorship. In purportedly democratic systems (but not exclusively so) competing political parties pursue interests and ideologies, though often LDCs have single and/or dominant party systems that are not exclusively class-based and may represent a shifting mix of ideology, race and ethnicity, regionalism, and religion, and be vehicles for charismatic leadership. Often they are linked to trade unions – associations of workers united in a single, representative entity seeking to improve workers’ economic status and employment conditions by substituting individual bargaining within labour markets with collective bargaining and workplace relations governed by rules and regulations, i.e. an internal state. However, political and trade union action is constrained by external capital markets (domestic capital markets being weak and small). Development policies rely on finance from MNOs, international aid agencies, foreign governments, and external financial institutions like the World Bank and IMF who often influence domestic policies. Each regime is rendered unstable by contradictions and conflicts that fuel political struggles nationally and within production and lay the basis for new regimes. Pre-colonial eras had indigenous MASs but subsequent MASs stem from external interventions beginning with colonialism and, after independence, policy advice from Western institutions promulgating state and then market capitalism. However, such idealised regimes of control often presumed contextual factors at odds with actuality, and ensuing contradictions and conflicts brought politicised state and market capitalist regimes with unanticipated MASs. Thus MAS transformations are contextually encircled, evolve historically, and are socially constructed. Figure 1 summarises this dynamic but contingent evolution: each epoch is illustrated with examples from the authors’ research below. The expanded framework in Table II provides the diagnostic tool used to analyse MAS research in LDCs. MAS under colonialism Colonial legacies are crucial for understanding accounting in most LDCs. Before colonialism MOPs were largely feudal and based on the local community (village) and families: productivity and income were governed by their needs, diligence, and the elements. Lords or chieftains often held land though producers normally owned the simple technology. There was no separation between work and the family, and little production of commodities for exchange with other communities or institutions (Taylor, 1979). Traditional societies did not necessarily lack accounting: An early Qing dynasty period novel details how Chinese household MASs incorporated traditional family and cultural values – they segregated financial duties and used cash controls and budgets but power distance stifled flexibility, professionalism and effectiveness (Chan et al., 2001). Traditional systems may persist today, e.g. Asechemie (1997) claimed that African accounting systems in informal economic sectors still accommodate traditional values, which provoked a sharp rejoinder from Wallace (1997) who questioned Asechemie’s account of pre- and post-colonial MOPs in Nigeria, the existence of African maintenance accounting, his oral history evidence, and whether pre-colonial Nigerian cash accounting and master-servant relations were impervious to agency problems. Nevertheless, non-colonial societies are dynamic and Management accounting 477 Figure 1. Stages in transition accounting helps shape cultural identities. In Siam[6] apparently neutral and technical accounts gave an economic base to Siamese national unity in the Bangkok period, projected a Siamese national culture and political identity, and integrated regions into the new nation-state (Constable and Kuasirikun, 2007). However, colonialism was the norm. The colonial state assimilated traditional and capitalist MOPs, initially through merchants’ capital, then commodity exports, and finally through imperialism (Hindess and Hirst, 1977). Colonial rulers did not impose capitalism generally but sought capital accumulation in the most profitable sectors – often exports of primary products from plantations, estates, and mines. Nor did they pursue industrialisation, e.g. jute manufacturing resided in Britain not Bangladesh (Sobhan and Ahmad, 1980). Important segments like rural agriculture and cottage industries were only reformed if attractive to finance capital. For instance, the East India Company forced farmers to grow raw materials such as jute for export rather than traditional produce. In Sri Lanka the British administration introduced a plantation economy for tea, coconut, and rubber. But MOPs were not invariably AAAJ 22,3 478 capitalistic, e.g. in Ghana manual techniques predominated in cocoa production and gold mining (Crisp, 1984; Robotham, 1989). Hence, particularly in rural areas with feudal social relations, traditional cultures and pre-capitalist MOPs predominated in sectors like agriculture, merchanting, and domestic manufacture, e.g. in Sri Lanka, Sinhalese life centred on villages following a traditional Buddhist culture (Jayawardena, 2000); in Ghana village life was based on tribes and subsistence agriculture (Bryceson, 1999). The colonial state had separate jurisdiction from companies. Formally, the imperial centre was unique, unquestionable, and autocratic: it was the basis of politics and local inhabitants could not question it despite being subject to taxes and rules. In rural areas feudal politics often remained, albeit acquiescent to the colonial power. Accounting was integral to subjectification. It promoted slavery in the British Empire and the USA, especially on plantations (Oldroyd, n.d.; Tyson et al., 2004; Fleischman and Tyson, 2004); enabled absentee West Indian sugar plantation landlords to exert control from a distance (Cowton and O’Shaughnessy, 1991), and helped imperial governments control indigenous, slave and settler populations (Annisette and Neu, 2004). However, subjectification was not invariably successful, e.g. taxation in British West Africa failed to inculcate calculative and cultural values or gain consent to governance due to local resistance (Bush and Maltby, 2004). Research on indigenous people in developed countries gives insight on accounting under colonialism (especially on Maoris, Aborigines, and first nation Americans – see Auditing, Accountability & Accounting Journal, 2000, No. 3). For example, alien and punitive accounting legitimated government confiscations of Maori wealth in New Zealand (Hooper and Kearins, n.d.); colonialism and professional accounting firms affected Maori women accountants’ experiences with deleterious impacts upon individuals and communities (McNicholas et al., 2004); financial techniques and force maintained colonial domination of indigenous Canadians and Mexicans (Neu and Heincke, 2004); accounting discourses institutionalised and rationalised relations, especially in land disputes, between the government and First Nations’ peoples during Canada’s “birth” (Neu, 2000; Neu and Graham, 2006); and US government reports in the 1930s on overgrazing contained numeric tables, accounts and notional family budgets constructed the Navajo as economic subjects and consumption units. Enacting the recommendations brought economic and social disaster (Preston and Oakes, 2001; Preston, 2006). Colonial states relied on self-regulation by finance from international capital markets operating within “company states” to control many economic activities (Burawoy, 1984). Public administration concentrated on imposing capitalist monopolies in selected sectors, and creating an infrastructure to procure raw materials and labour, and shift commodities (Brewer, 1984). International cartels and banks co-ordinated capital flows within territorial trade divisions agreed with the imperial power, which produced a dual economy: traditional agricultural, merchant, and domestic; and modern export. A small merchant and landowner class exercised domestic capitalism but local capital accumulation was small, hence the limited development of local capital markets, e.g. the Colombo Stock Market founded in 1896 confined its operations to MNOs. Colonial politics divided people into white imperialists and local inhabitants. The formers’ domination was justified through notions of racial superiority. Trade unions were initially illegal. Rudimentary labour markets existed but many indigenous workers had access to subsistence agriculture, so colonial firms often imported contract labour from rural areas or other colonies. The colonial power’s “divide and rule” tactics compounded racial and ethnic divisions (Burawoy, 1985), e.g. Tamils brought from India to work on Sri Lankan plantations had inferior prospects than indigenous people; suffered discrimination; and subsequent Sinhalese and Tamil worker conflicts produced ethnically driven MASs on tea estates (Alawattage and Wickramasinghe, 2008). In Bangladesh the colonial state divided tasks according to peoples’ religion, sending Hindu personnel to Muslim areas and vice versa to collect rents and rates (Sobhan and Ahmad, 1980). In Ghana, labourers brought forcefully from the predominantly Moslem north to work in mines in the predominantly Christian south were accorded lower status by Southerners who considered mining as dirty and preferred managing (Crisp, 1984; Ayensu, 1997; Robotham, 1989). These ethnic divisions still impact how MASs function in LDCs today. Colonialism often brought despotic control regimes based on physical measures, reinforced by sanctions like fines in large commercial companies[7]. Colonial organisations had few concerns about securing consent as employees could not question or resist colonial bosses and organised worker resistance was illegal. Controllers were unregulated in the company state and had arbitrary powers that extended beyond work, e.g. in Zambian mines, racial, physical and rudimentary rules prevailed; physical violence was the rule despite native supervisors; workers’ wages required completed “tickets” allocated at the whim of white bosses; and no job structures or formal recruitment, promotion, and training rules existed (Burawoy, 1985). However, not all labour was “captive”: harsh controls fostered resistance (Taylor, 1979), e.g. Sri Lanka plantation workers rioted against “white bosses” and colonialism (Jayawardena, 1972). Disorganised resistance brought nascent trade unions that linked with independence movements led by foreign-educated, left-minded, local leaders and religious groups. Late colonial politics remained imperialistic but political realities forced the state to recognise unions and rudimentary collective bargaining (Kearney, 1971, 1973). Nevertheless, direct, coercive controls over labour during colonialism meant abstract bureaucratic controls such as MASs probably had little role. The emphasis of internal control lay upon production. Local costs were not critical for profitability compared to international commodity prices and preferential trading agreements. Imperial firms may have used MAS for planning and setting targets for overseas operations but the emphasis lay on financial reporting for stewardship and tracking remittances. However, these observations are tentative as our search parameters omitted accounting history journals – in retrospect a misjudgement. State capitalism Colonialism often bequeathed a relatively effective central state bureaucracy and legal systems: elsewhere regulation was weak and underdeveloped. Many economies now had capitalist and non-capitalist MOPs. However, agriculture and primary production, and non-capitalist MOPs and cultures predominated, which left LDCs vulnerable to commodity price shifts and the elements, and heightened their dependence on international finance. Capital markets were small and weak: a small indigenous capitalist class existed but large foreign firms were often dominant, e.g. Bangladesh’s Management accounting 479 AAAJ 22,3 480 small local capitalist class had little capital, concentrated on merchanting, and being politically and economically marginal supported an expanded state sector (Sobhan, 1991, p.164). Within state capitalism the state dominates finance and capital markets as it controls much of the Gross Domestic Product (and hence employment opportunities); funds most industrial activities (often through international aid); and allocates resources to public enterprises. Mobilising finance through capital markets was deemed unnecessary – banking was concentrated in state banks and in Bangladesh the Stock Exchange ceased activity. Similarly, in Sri Lanka and Ghana capital markets remained inactive as most large companies were nationalised and state financed and remaining large foreign owned enterprises raised capital abroad (Moss, 2003). Influential, educated elites – often former employees of colonial organisations and/or from privileged classes – held more modern Western beliefs. They supplied many post independence leaders who embraced the politics of state capitalism[8]. This advocated industrialisation, urbanisation, modern values, and nationalism. MOPs based on central state planning of major commercial enterprises were introduced, consistent with Western advice, socialist independence movements’ ideologies, and pragmatic necessities. Building nationalism through state-led development sought to counter subjects’ allegiances to families, regions, or ethnic groups that colonialism had exacerbated. Issues of traditional culture were recognized but relegated to arts and religious spheres in a purportedly secular state. Initially politics resided in democratically elected governments in multi-party parliaments. The presumption, reflected in constitutions, was that state executive action lay in a centralised legal-rational bureaucracy staffed by officials appointed on merit and expertise to serve the national well-being, reinforced by legal institutions left from colonial administration. Large SOEs were created with boards nominated by ministers. The intention was for ministers and planners to set policy and managers to execute it, with accountability to the minister-in Parliament. For example, in 1947 Bangladesh (East Pakistan) became part of Pakistan (Sobhan and Ahmad, 1980). The state created an industrial base with a capitalist MOP, establishing state monopolies under state regulation in urban areas (though raw materials and labour came from rural areas). The first Bangladesh Government nationalised all industrial units but left rural agriculture and cottage industry untouched. When it was overthrown SOEs held 92 per cent of fixed industrial assets (Uddin and Hopper, 2001). After independence the Ghanaian government nationalised foreign companies, consistent with allegiances to the Soviet Union. Massive state investments in manufacturing SOEs and infrastructure in cities followed – rural agriculture received little attention – despite employing 60 per cent of the workforce. However, nationalisation was not total, e.g. some gold mines were spared following deals between Western businessmen and politicians (Petchenkine, 1993). In Sri Lanka in 1956 a left-wing government nationalised all major public services and most large industries but ignored agriculture and domestic industries (Wickramasinghe and Hopper, 2005). Ideologically governments were sympathetic to trade unions. Although labour markets were weak, parties often had a trade union wing: they knew the political significance of an organised working class, particularly in large organisations in urban areas. Politicians, oft indebted to union backing during independence struggles, reconstituted labour conflict into collective bargaining (Reuther, 1958). In Bangladesh rules and regulations governed electing collective bargaining agents, labour courts, consultation, and strikes. Workers gained rights to join trade unions but in return unions had to operate within an internal state that governed internal labour markets in SOEs. For example, the Bangladesh soap company and the jute mills had detailed job classifications; rules on wages, promotions, recruitment, and training; and permanent employment (Uddin and Hopper, 2001). In Ghana, upon independence the Convention People’s Party (CPP) government’s 1958 Industrial Relations Act recognised trade unions and made collective bargaining binding but political rights for trade unions were conditional upon registering within the CPP (Mihyo and Schiphorst, 1995). Similarly, in Sri Lanka labour gained significant social and political status within SOEs. Nationalisation legislation gave the state considerable power over SOEs and accounting was accorded crucial roles. The assumption was that central state planning would act as a legal rational bureaucracy and some state intervention in management control was expected. Audited financial accounts of enterprises, fed back through Ministries to Parliament, formed the backbone of accountability and regulation. Iterative budgeting that coordinated central plans with SOE activities formed the basis of enterprise planning and control. Resource allocation decisions would be made centrally according to relative returns and development priorities. For example, the initial Bangladesh government formulated a two-year plan aimed at agricultural self-sufficiency, import substitution, and industrialisation. Regulations, Financial Control Directives, and Presidential Orders made enterprises accountable to state institutions, especially the Ministries of Industries and Finance and Planning. Rigid rules and regulations governed the preparation and approval of accounts. Each SOE must submit annual accounts to the government under the Bangladesh Industrial Enterprises Act. The Comptroller and Auditor-General through the Office of the Director of Commercial Audit audited these, and the Public Accounts Committee reviewed their reports on behalf of Parliament (Hoque and Hopper, 1994; Uddin and Hopper, 1999, 2001). In Ghana the Ministry of Finance and Economic Planning became responsible for budget allocations in each SOE, which needed ministerial approval. The Auditor General’s Department with the Comptroller and the Accountant General’s Department annually audited accounts (Killick, 1978). In Sri Lanka, Parliament established financial regulations and establishment codes for ministries to regulate SOEs. The Auditor General audited public sector accounts, financial procedures, budgets, and related reports and the parliamentary Public Accounts Committee could investigate them (Wickramasinghe and Hopper, 2005). Initial MAS and development research reflected beliefs in central state planning, public ownership, and industrialization: it accorded accounting a central role. Ndzinge and Briston (1999), and Seidler (1967) claimed timely and reliable accounting information for investment decisions and national economic planning would promote growth. Seiler (1966) claimed accounting systems supply important financial data to business and the state but accountants were marginal and provided inadequate data, hence the need for accounting education and professional development within a self-governed accounting profession. Needles (1976) argued that institutions that transfer accounting technology (education bodies; international organisations; government agencies; MNOs; international accounting firms; and local companies and accounting firms) should create a sub-plan within the overall economic plan to this Management accounting 481 AAAJ 22,3 482 end. Budgets were seen as cornerstones of planning and monitoring; accounting information crucial to rational central resource allocation; and financial accounts to accountability. Enthoven (1982) saw MAS as the most important as it, “assists development programming in determining and improving efficiency and productivity” (Enthoven, 1982, p. 109) and he sought an international, interdisciplinary MAS theory serving socio-economic aims. In retrospect these early writers identified the neglect of accounting in development practice, policy and research. Their contributions were admirable if Utopian. They subscribed to the idealised state capitalist development model and promoted Western techniques and institutions. Their contributions were ambitious, deductive and normative but light on empirics, application, or theory of any ilk. Some later papers dissented. Needles (1976) emphasized that accounting choices required greater understanding of LDCs’ social, cultural, political and legal environments. Mirghani (1982) advocated broader MASs incorporating indigenous not Western development models to reduce uncertainty in development planning. Ghartey (1985) expressed pessimism, claiming that in most African countries, governments’ monopoly of power, bureaucracy, conflicting policies, ineffective institutional structures, and cronyism rendered MASs marginal and ineffective; poverty and dominant elites’ lack of motivation stymied adoption of technologically advanced systems; cultures based on extended families led to corruption, malpractice, and everyday life characterised by fear, tension, insecurity; and the attendant uncertainty produced recurring managerial crises. In short, he counselled that effective MASs require good governance. This paper picks up these themes, arguing that when idealised state capitalist systems hit actualities they often became vehicles for political factionalism[9] resulting in MASs assuming unanticipated roles. From state capitalism to political factionalism State capitalism presumes employees habituated to a capitalist culture and MOP but frequently this is not so. Dichotomising cultures between traditional and modern is dangerous as LDCs contain elements of both and cultures change. Consequently local leaders faced conflicting expectations – traditional, modern or hybrid. For example, workers in a SOE in a Sinhalese Buddhist village did not seek modernity (but sought many of its benefits). Unaccustomed to a non-capitalist MOP, including factory time and discipline, they prioritised village rituals and institutions above mill duties, expecting managers to exhibit “kingship”. Their village culture and religious obligations superseded bureaucratic rationality and fused with local political agendas. Managers reciprocated, with political support from parties and trade unions, leading to padded budgets, modest performance targets, and losses (Wickramasinghe and Hopper, 2005). Similarly, traditional culture permeated activities in a Ghana gold mine. Sacrifices to pacify gods were undertaken and accidents attributed to superstitions, and new executives (whether expatriate or indigenous) were introduced to the chief and elders, and necessary prayers said. Miners were used to agricultural patterns of work and time, and managers modified work practices and budgets accordingly – not doing so would compound political interventions (Tsamenyi and Hopper, 2003). Ethnicity can compound cultural issues. State capitalism emphasises meritocracy: race and ethnicity should be irrelevant but often underpinned the reproduction of national politics within firms. In Sri Lanka ethnic tensions between Sinhalese and Tamil have fuelled a long running civil war, and shape controls on tea estates (Alawattage and Wickramasinghe, 2008). In Africa ethnicity cannot be downplayed (Doornbos, 1991, p. 54). Ghanaian politics follow ethnic lines and in the gold mine they influenced appointments, investments, and promotions, provoking shop floor disputes that reinforced tribal stereotypes, e.g. managers from the Moslem north had problems establishing authority over subordinates from other regions (Silver, 1978; Robotham, 1989). State capitalism assumes a populace and state committed to nationalism, modernisation, legal rational governance, and secularism but in variegated ethnic, religious, or cultural environments political survival is fraught and bureaucratic rationality difficult to maintain. Educated elites, politicians, and senior civil servants are inter-linked, powerful, and can reap large benefits from office, sometimes illicitly. Well-qualified bureaucrats with legal-rational norms may be scarce which, coupled to low remuneration, can foster corruption and sway decisions towards family, community, and ethnic affiliations. Politics did not consist of multiple parties premised on class relations as in industrial societies. Instead parties often followed regional, ethnic, or religious lines, or charismatic leaders, and reflected traditional allegiances not modern ideologies – whether socialist or capitalist – bringing unstable governments, switches from multi to one party democracy and military dictatorships (Olowo-Okere, 1999). For example, Ghana had five military governments since independence. Dr Nkrumah’s government created a one-party state, banned opposition political activities and imprisoned, exiled, or killed opposition leaders (Petchenkine, 1993). In Sri Lanka, families who led parties used “thug leaders from the under-world” during power struggles (Wickramasinghe et al., 2004). In 1975 a military coup overthrew the Bangladesh government, its leader was murdered and despite democracy being restored politics remained turbulent with governance based on patronage and expediency. Politicians and officials may wish to modernise but survival may require satisfying popular non-capitalist cultural expectations through patronage and illicit means, which may also cement their own interests (Uddin and Hopper, 2003). In many LDCs trade unions are conduits to political power. State capitalism tried to co-opt trade unions through an internal state based on collective bargaining. However party-based unions with branches in enterprises fuelled inter-union and party rivalries within factories. Trade unions’ ability to link shop floor resistance to national politics made them central players and constrained managers operating commercially. For example, in Bangladesh employees supporting opposition parties had legitimate cases for promotion refused but government supporters were favoured (Alam and Lawrence, 1994; Hoque and Hopper, 1994). Politicisation of trade unions was prominent in Ghana. Dr Nkrumah granted employment in SOEs to political loyalists. In 1961 he appointed the General President of the Ghana Mines Workers Union to the Ghana State Mining Company board and in 1963 when he became Chairman and Managing Director he hired and rewarded employees loyal to Nkrumah’s policies and fired those not (Silver, 1978). Popular movements (including the TUC) were annexed to the CPP and union activities deemed contrary to the government were made illegal. In gold mines strikes often brought military intervention (Robotham, 1989). In Sri Lanka management control was also politically sensitive. In the textile mill union leaders determined Management accounting 483 AAAJ 22,3 484 workers’ pay, leave, and promotions not the Human Resources Manager (Wickramasinghe and Hopper, 2005). International finance bodies like the World Bank and IMF supported state led industrialisation. However, ideological predilections and political vassalage often secured loans rather than projects’ economic merits or likelihood of execution: “Cold War” politics forced many LDCs to choose between Soviet bloc and Western donors, convincing either of their strategic importance. Politicians became nimble in cultivating external political relations and appearing to meet aid conditions; and external agencies pursuing political ends were indifferent as to whether leaders with questionable credentials would use funds as specified or promote democratic, transparent, and effective governance. For example, in Ghana Dr Nkrumah embraced a communist ideology to gain financial and technical support from the Soviet Union (Petchenkine, 1993). In Sri Lanka, governments veered towards their politics and economics when the socialist-bloc financed industrial ventures (Wickramasinghe and Hopper, 2005). This encouraged corruption, economic mismanagement, and patronage politics. In Ghana ministers and heads of public institutions were prosecuted for “kalabule” (local term for corruption) and mismanagement – in 1979 six deposed Supreme Military Council government members were shot for corruption (Hansen and Collins, 1980). In Bangladesh managers could not resolve matters like industrial relations disputes, appointments, financing, and pricing as they were the prerogative of ministers and their political colleagues (Sobhan and Ahmad, 1980). In Sri Lanka families that once served the imperial government exploited their prominence in post independence parties to augment their wealth (Jayawardena, 1972). Government regulations to minimise corruption, e.g. requiring qualified officials, were flouted (Jayawardene, 2000). Workers realised that satisfying their demands lay in political patronage via party-based unions not managerial decisions. Thus it is unsurprising that research catalogues a litany of budget problems in SOEs: state capitalism in action bore little correspondence to its ideals. For example, accounting in an Algerian state construction enterprise existed but apart from financial officers at head office few knew of it; production not accounting language permeated management due to government pressure to complete projects, insufficient materials and production capacity, and state control of costs and prices (Ouibrahim and Scapens, 1989). An Algerian SOE was similar: employees had accounting skills but accounting information was marginal to government decisions; annual financial reports were prepared but not scrutinised; cost accounting was used to calculate subsidies but not used at operational levels – here production language predominated because managerial bonuses were tied to physical targets (Jones and Seffiane, 1992). In four Ghanaian SOEs budgets were centralised, managerial participation was minimal, and they were ignored due to high inflation, insufficient resources and managerial accounting knowledge, and slow badly presented reports (Tsamenyi et al., 2002, 2004). Recent research is similar. An enterprise resource planning customization failed in an Egyptian SOE due to government agencies insisting on uniform accounting (Kholeif et al., 2007). World Bank-sponsored MAS reforms in a Ghanaian SOE had little impact upon accountability: budgeting remained politicised, delayed, directionless and ineffective (Uddin and Tsamenyi, 2005). Accounting unrelated to rewards or actual circumstances becomes irrelevant to managers, especially when political interventions predominate. For example, accounting in the Volta River Authority in Ghana became renegotiable in the light of environmental changes and negotiations with the government (Rahaman and Lawrence, 2001). Industrial relations, accountability, and accounting in Bangladeshi SOEs became symbolic and detached from operations. Formal mechanisms remained intact but became ritualistic, rule-bound, ceremonial, irrelevant rituals, i.e. loosely or totally decoupled. Politicians did not abandon them for they needed a veneer of legal rationality to secure legitimacy from external bodies and the populace, but they and central planners paid little heed to accounting, setting higher but unrealistic budget targets to demonstrate political prowess. Meaningful accountability often never occurred – Parliament rarely discussed technically and procedurally sound financial accounts (Hoque, 1995; Hoque, 1995; Hoque and Hopper, 1994, 1997; Uddin and Hopper, 1999; Alam, 1997). Many dissatisfied managers sought more budget participation and flexibility (Maunders et al., 1990), and some resisted granting undue deals on ethical and/or commercial grounds but most recognised their weakness, disregarded budgets, and struck informal deals with local trade union leaders, workers, and suppliers to maintain production, and attributed budget shortfalls to unrealistic targets whilst manipulating budgets to protect their reputations. State capitalism rarely functions as intended or in a linear rational manner. Legislation making enterprises accountable to the state gave conduits for political intervention into financial management rendering legal-rational bureaucracy illusory. This is not merely a venal exercise of power by the powerful (though this can occur) but a product of socio-economic factors leading to political factionalism. Thus bureaucratic procedures to control corruption and facilitate legal rationality became vehicles for the behaviour they sought to eliminate. However, politicians found space for political manoeuvre increasingly constrained as SOE losses and large public sector deficits diminished resources. The status quo was unsustainable without international finance but the cessation of “Cold War” politics ended benign loans for client states. Increasingly right wing ideologies like Thatcherism and Reaganism cast scepticism on economic aid unaccompanied by structural reforms. International financiers, frustrated with state’s corruption, inefficiency, and failure to deliver services to the poor, turned to market capitalism and NGOs. The aim was to replace political factionalism and patronage with private ownership and market exchanges. Aware that fiscal crises precipitate political crises, LDC governments knew they must (or appear to) comply. Market capitalism Market capitalism often emanates from World Bank and IMF structural adjustment programmes’ (SAP) loan preconditions stipulating free trade, competition, private capital, limited government intervention, and public sector reforms (Toye, 1994; Cook and Kirkpatrick, 1995; Hemming and Mansoor, 1988; Cook, 1986). SAPs instruct LDCs to create conditions conducive for international finance capital and capital markets by eliminating subsidies, price controls and import barriers; reorganising and lessening public ownership of domestic banks; promoting private banks and domestic capital markets; privatising or closing SOEs; and introducing “new public management” (NPM) in government agencies. They promote legislation that forces trade unions (especially public sector ones) into collective bargaining, severs their party links, and Management accounting 485 AAAJ 22,3 486 curtails labour rights, especially in export zones. Market mechanisms should co-ordinate and control, and thence stimulate economic performance – not state regulation reliant on problematic accounting inputs (Peasnell, 1993). Market capitalism pays little heed to culture, race and ethnicity assuming a capitalist MOP with modern management controls will induce worker discipline, effort and co-operation; empower managers to exploit economic rent opportunities; and engender meritocracy, individualism, legal rational beliefs, and obligations to employers. The aspiration is for the state to play a greater supply-side role, follow legal-rational not partisan decision making, and create infrastructures conducive to market capitalism by promoting law and order, financial and commercial mobility, education and training congruent with market needs, and regulatory bodies, especially for privatised utilities where monopolies prevail; protecting property rights, and for politics to consist of parties competing to deliver such regimes. SAPs were enforced in many LDCs confronting fiscal deficits. In Bangladesh the initial socialist government fell partly because SOEs’ losses consumed 30 per cent of project aid. Subsequent military governments facing domestic opposition and fiscal deficits had to accept loan conditions from financial agencies demanding privatisation of SOEs (whether loss-making or not) (Uddin and Hopper, 2003). In Ghana Dr Nkrumah’s government (1957 to 1966) fell and the military National Liberation Council and then the civilian Progress Party (PP) governments implemented IMF/World Bank economic policies incorporating privatisations in 1970 but Colonel Acheampong’s military government deferred them after popular backlash. Nevertheless, the Soviet bloc decline forced Ghana towards Western financial institutions. It became an early Sub-Saharan African country to adopt SAPs (Uddin and Tsamenyi, 2005; Tsamenyi et al., 2002). In 1983 Rawling’s military government accepted IMF/World Bank recommendations to reduce government market interventions, encourage domestic savings and foreign investment, privatise SOEs, and improve the balance of payments (Petchenkine, 1993; Tsamenyi et al., 2004). In Sri Lanka in 1977 a new right-wing government pursued an “open economy”, and under IMF and World Bank pressure embarked on privatisations and rolling back the public sector (Wickramasinghe et al., 2004). SAPs require effective accounting but development economists and policy makers often neglect this. They incline to macro-economic solutions presuming that accounting is technical, unproblematic, and flows automatically from market relations. Ndzinge and Briston (1999) despair at poor links between accountants and development specialists, and accounting technology transfers unadapted to local conditions. Too often non accountants assume that accounting, especially if it follows international standards, will provide the information and transparency necessary for financial markets to invest optimally and make enterprises accountable to them. It is assumed that stronger agency relationships; fears of hostile takeovers and dismissals of recalcitrant managers; improved technology; and greater competition will improve controls within and over enterprises. However, this is questionable: SAPs may initiate new forms of despotic control within reconstituted patronage politics. SAPs provide macro-economic solutions to fiscal problems. They only indirectly deal with delivering aid programmes. Here NGOs have assumed a major role[10]. Until the 1980s they received little attention but they are now numerous: there are possibly two million in India. They provide emergency relief, health care, education and training, housing, legal services, and micro-credit. Their growth has been attributed to government failures to promote and deliver development; NGOs’ superior efficiency, flexibility, honesty, transparency and accountability, and their reach to disadvantaged groups, especially the very poor and women. International finance and aid agencies (often NGOs), and foreign governments have increasingly transferred projects from LDC governments to NGOs to transcend political factionalism in the belief that NGOs are more transparent and accountable (especially to beneficiaries) and have more effective internal controls. However, there is little accounting research on whether this is so. Whence market capitalism? Market capitalism is an “idealised” normative model. It attracts criticism. The World Bank, IMF and Western donors like USAID are accused of ignoring local resistance to privatisation; inadequate financial systems for equity sales; local needs; inadequate regulation; and inconclusive evidence that private enterprises outperform SOEs (Commander and Killick, 1988; Cook and Kirkpatrick, 1995). Stiglitz (2002) argues that IMF “solutions” worsen (even create) problems by unduly promoting global finance interests. These debates filter down to accounting. Talaga and Ndubizu (1986) found tensions between orthodox and political economy development paradigms, and normative and positive accounting, reinforce political factionalism and/or new forms of “crony capitalism” and coercion. Thus the question is whether MASs reproduce market capitalism whilst serving broader development goals or do they foster political factionalism and coercive controls? This is explored below. First, research on MASs’ operation in private companies in LDCs (private from inception, privatised, and Chinese enterprises undergoing market reforms) under market conditions is examined. Then MAS research on NGOs is discussed. The turn to market-based policies and NGOs reflects donors’ frustrations with state organisations. However, this and associated NPM reforms raise governance issues, not least corruption, and politics, especially the involvement of civil society. These are discussed in the last section. MAS within private enterprises Research on MAS practices in private companies in LDCs is sparse. Only two surveys were found. The first found MAS use and sophistication in 40 Egyptian private firms was limited: no advanced accounting techniques were applied, activity-based costing was largely unknown, and costing was used for pricing not performance measurement, process improvement or cost reduction (Van Triest and Elshahat, 2007). In contrast, intellectual capital in 119 Malaysian companies was linked to value-based and mixed financial and non-financial measures, and “beyond-budgeting” controls rather than profit and performance oriented systems. Financial capital budgeting measures (but rarely “real options”) were used but possibly to legitimise decisions (Tales and Sofian, 2007). Market reforms encourage private firms to adopt conventional MASs. Indian firms’ budgets were perceived as more realistic, meaningful and useful, especially when forming strategy, following economic reforms in 1991. However, unlike Western firms but consistent with Indian culture, they sought more supplier partnerships despite being defenders (Anderson and Lanen, 1999). In Latin America, during social and economic crises defender and reactor strategies were positively, and prospector and Management accounting 487 AAAJ 22,3 488 analyzer strategies negatively associated. Prospector strategies and budget use were positively associated (Collins et al., 1997). Seven years of MAS changes during growing competition were institutionalised in the Banco do Brasil (Guerreiro et al., 2006) and four South African retailers increasingly used contemporary MASs, especially ABC and balanced scorecards, following government deregulation and global competition policies (Waweru et al., 2004). However, uncertainties in LDCs do not derive merely from market pressures. The only study of a small private company revealed that during ten years of Palestinian political crises its MAS became more mechanistic under political stability but more organic when political uncertainty increased (Kattan et al., 2007). Some researchers allege Western MASs are alien to many LDC cultures, e.g. Velayutham and Perera (1996) claim they emphasise contracts between agents and principals and reflect individualism whereas Asian and African accounting rationalises collectivism. However, evidence on whether more culturally attuned indigenous MASs exist in private companies employing capitalist MOPs is sparse. For example, claims that Asian managers do not value participation are not well supported. Malaysian companies used budgets for forecasting and control, and though managers perceived strong budget pressure they sought more budget participation (Chun, 1996). Thai bank managers’ budget participation was linked to performance and appropriateness of but not commitment to achieve goals (Virameteekul et al., 1995). A Chinese MAS reproduced high power-distance values, top-down communication, pseudo-participative management, and dictatorial leadership but subordinates complained of inequality (Chan and Lee, 1997). Cultural effects have been studied in Latin America. Frucot and Shearon (1991) found USA but not Mexican MNO managers linked satisfaction to the locus of control, and Mexican managers in foreign MNOs viewed budget participation and the locus of control differently to managers in Mexican companies. This was attributed to cultural differences. Leach-Lopez et al.(2007) extended this, finding budget participation and performance of USA managers in the USA and Mexican managers in USA companies in Mexico were associated but causal explanations varied, especially for Mexican managers not bilingual or without US supervisors. Family ownership is more prevalent in LDCs. This may bring informal and arbitrary management controls, information restricted to family confines, and rules and regulations superseded by family or friendship connections (Black et al., 2000). For example, the MAS of a large Bangladesh listed company enabled the owning family to maintain control despite being detached from operations, consistent with claims that familial controls tally with traditional cultures in many LDCs (Uddin, n.d.). Other cases support these observations. Ansari and Bell (1991) found control in a Pakistan company run by three brothers was initially based on trust but the introduction of formal centralised accounting by one brother after a financial crisis precipitated family disputes. Professional managers resented their reduced discretion, the other brothers wanted traditional controls restored despite knowing they would impair efficiency, and eventually the business failed. The importance of “family” was also found in an Indonesian firm owned by three Chinese Indonesian friends (Efferin and Hopper, 2007). They introduced rational Western controls including budgets, financial controls, formal wage scales, and financial rewards for performance, alongside systems based on Chinese values adapted to local contexts, especially ethnic tensions. In contrast, social relations, culture and symbolism dominated control in a private family-owned Indonesian university, rendering the MAS largely irrelevant (Tsamenyi et al., 2008). Contemporary development policy emphasises: small and micro-organisations – households, shopkeepers, money lenders, peasant agriculture, and fishing – substantial economic sectors of many LDCs, especially regarding employment; building financial infrastructures to sustain micro-finance institutions and programs, and induce private sector participation. However, MAS research has neglected these areas (Dixon et al., 2006) thereby reproducing past policy biases by concentrating on large industrial and commercial organisations. What research exists suggests that micro-organisations’ MASs are affected by traditional cultures and MOPs. For example, calculative practices of fishermen in a poor rural Sri Lankan village reproduced a MOP rooted in traditional village cultures and local power relations (Jayasinghe and Wickramasinghe, 2007). Traditional culture influenced three Bangladeshi small traders’ accounting: its absence was attributed to social and state institutions not demanding it, and norms of reciprocity and trust when trading – though debtor records were sometimes kept once traders became literate (Jacobs and Kemp, 2002). Asechemie and Ikeri (1999) found Nigerian artisans did not keep systematic cost records (as reported by Onuoha, 1994; Phillips, 1991; Nwachukwu, 1990; Asechemie, 1996) but used accounting strategically and flexibly – marginal cost pricing was perceived as fairer and more competitive than profit maximization, and their labour value was not deducted – consistent with African traditions. MASs, albeit in different guises, exist in micro-organisations in traditional sectors of LDC society. Policy makers increasingly see micro-enterprises as important sources of new jobs but they are financially constrained by banks that use conventional lending methods, over-estimate risk in loan proposals, and have high transaction costs, e.g. Satta (2006) found a small Tanzanian cooperative bankhad the best small firm financing schemes in poor rural areas bereft of financial services. Consequently, development funding is increasingly channelled to micro-organisations through microfinance providers like rural banks, cooperatives, and NGOs. More accounting research needs to aid providers and recipients of micro-finance (Satta, 2004). Micro-finance institutions have often generated creative, simple and effective systems with minimal transaction costs to generate, assess, and recoup loans to poor and disadvantaged groups using oral social controls embedded in traditional cultures. This is an example of where accounting needs blending with household and village exchange relations, their social structures, and attendant values and beliefs, to reduce poverty and empower marginal, less powerful groups. Micro-organisations and micro-finance are neglected but important areas of MAS research that call for novel methods, often action-based, and a reconstitution of the MAS domain Research on privatised enterprises also suggests that market reforms impact MASs, though Vernon-Wortzel and Wortzel (1989) argue that enhanced SOE performance could be achieved by improved controls rather than ownership changes. Following privatisation a Bangladesh soap company computerised management information systems, and improved market information and production scheduling (Uddin and Hopper, 2001). The partial privatisation of Sri Lankan telephones renowned for poor service, inefficiency, and political patronage culminated in a Japanese minority shareholder undertaking its management. This brought consultative leadership, trade union co-operation, new management controls, intensive capital investment, younger Management accounting 489 AAAJ 22,3 490 better qualified staff, and some commercial success (Wickramasinghe et al., 2004). When a Sri Lankan textile mill was privatised its owners invested in new machinery, maintained existing industrial relations, and improved controls (Wickramasinghe and Hopper, 2005). Two Ghanaian SOES sold to foreign MNOs improved performance after major MAS changes (Tsamyeni et al., n.d.). When a Ghanaian gold mine was corporatised (government equity reduced to 20 per cent) investment revived and MASs introduced, including an integrated software package for planning and control, activity-based costing, cost cutting measures, budget based managerial performance evaluation; and budget training, though gaming and ethnic tensions associated with budgeting persisted (Tsamenyi and Hopper, 2003). These reports resonate with research on Chinese enterprises’ MAS practices in the transition from Maoism to Dengism. This research is interesting being the most intensive in a single LDC undergoing market reforms. Under Mao ideologies of class struggle, central planning, and public ownership constructed a class view of accounting and prohibited Western accounting whereas under Deng, such methods were encouraged and portrayed as a neutral technology spanning national boundaries (Ezzamel et al., 2007). Gradually a market ideology based on mixed-ownership; enterprise autonomy; less mandatory state planning; and greater macro-economic regulation (Zhou,1988) fostered management planning, budgeting, performance evaluation, forecasting, and control built on responsibility accounting used since the 1950s (Child and Xu, 1991; Scapens and Yan, 1993; Bromwich and Wang, 1991; Skousen and Yang, 1988; Scapens and Yan, 1993; Scapens and Ben-Ling, 1995; Maschmeyer and Ji-Liang, 1990). Lessons were learned from joint ventures, e.g. Chinese participants’ MASs resembled those of foreign partners more than their Chinese counterparts (Firth, 1996). However, joint ventures can hit difficulties: Chinese partners often pursue longer term strategies than USA partners and expect eventually to assume control (Yan and Gray, 1994); and USA partners use controls to transmit and protect their knowledge whereas Chinese partners see them as sharing and protecting investments. Managerial disputes often reflect each partner’s relative knowledge and investments but MASs reduced negative impacts of partner transaction costs and were positively associated with performance (Chalos and O’Connor, 2004, 2005). However, Western ignorance of Chinese MAS practices and their behavioural underpinnings hindered Chinese managers applying them, bringing calls for more facilitative, process based assistance (Scapens and Yan, 1993). Nevertheless, MAS change popularised in academic journals, seminars, and training (Bromwich and Wang, 1991) has produced debate and experimentation, e.g. in financially restructuring Chinese SOEs (Lee, 2001); on how employment contracts, joint venture experience, stock exchange listing, and training affect “Western” MASs (O’Connor et al., 2004); combining responsibility accounting with target costing, standard costing, performance evaluation, and internal transfer pricing (Lin and Yu, 2002); implementing ABC in the face of internal resistance but with top management support and a company culture of “top –down” innovations (e.g., economic-value added, balanced scorecards and six sigma) (Liu and Pan, 2007); and effects of political constraints and liberalization measures upon MASs (O’Connor, Deng and Luo, 2006). China is unique having controlled its development and transition to market-oriented policies itself but it has insights for other LDCs. It initially retained uniform accounting – a legacy of an economy marked by strong state-ownership, a weak accounting profession, and weak equity markets – but subsequently reformed these and accounting regulation and controls according to China’s cultural, political and economic history (Davidson et al., 1996; Graham and Li, 1997; Xiao et al., 2004). Thus there is growing evidence of contemporary MASs being adopted in private companies in LDCs following market liberalisation, with tantalising but limited detail on adjustments to cultural, family and local political circumstances. Nevertheless, this may impede broader development aims. First, increased MNOs’ power is a frequent concern, e.g. Chand and White (2007) allege that MNOs and large international accounting firms influenced Fiji to adopt international accounting standards (IASs) for their own ends contrary to public interests. However, judging MNOs is not clear cut: Malaysian local companies were less committed to social responsibilities than foreign, particularly USA and British, companies (Teoh and Thong, 1984). Rivera (1982) found MNOs faced problems of insufficient experts, poor accounting education, and malfunctioning public services but often MNOs increase accounting capacity by providing good training and practice. Nevertheless, MNOs’ use of transfer pricing to shift its tax burden to favourable jurisdictions is a worry. For example, transfer prices of MNOs in Bangladesh rendered them less profitable than local firms despite MNOs’ superior market power and resources (Rahman and Scapens, 1986); identical transfer prices for tax compliance and internal management in an MNO brought a more coercive MAS (Cools et al., n.d.); and debates on cost and market-based transfer pricing prevail in China (Chan and Chow, 2001). Some researchers advocate standard global transfer pricing to prevent MNOs exploiting differences in tax policies, import duties, transfer pricing regulations, withholding taxes, profit repatriation and currency risks (Borkowski, 1997). Armstrong (1998) argues that neo-classical economic MAS research on transfer pricing concentrates on individual state-MNO relations to the neglect of global capitalism, economic regulation, and calculations by nation states. Whatever, given its importance in public policy, the sparseness of MAS research on transfer pricing is surprising, especially as many LDCs and policymakers have ceased vilifying MNOs in the belief that they provide foreign capital, create employment, and bring managerial expertise. Second, MAS changes accompanying market reforms may weaken protections and interests of other stakeholders vis à vis owners. Botha (1995) argues that South African market reforms have made inequalities and injustices created by apartheid more visible, and MASs should be more conducive to democracy, sustainable growth and wealth redistribution. In China the simultaneous use of old and new MAS methods have exaggerated tensions over generating profits and jobs (Skousen and Yang, 1988) bringing worker unrest, resource misallocation, and demands for more non-financial measures (Maschmeyer and Ji-Liang, 1990). MAS changes with a commercial rationale may reduce employee protection gained through trade unions, foster coercive control, and engender corrupt managerial practices. For example, when a Bangladesh soap company was privatised financial information became the preserve of the controlling family who imposed arbitrary, physical budgets reinforced by hiring, firing, and promoting at whim: they destroyed the internal state and internal labour markets, sacked workers, and then rehired them at lower wages through subcontractors. External reports ceased in violation of company law and stock exchange regulations bringing allegations of irregular financial transactions, exploitation of minority shareholders, and prosecutions by tax officials and banks (Uddin and Hopper, 2001). A privatised Sri Lankan textile mill financially collapsed when the owner fled abroad Management accounting 491 AAAJ 22,3 492 having fraudulently removed machinery purchased with state bank loans (Wickramasinghe and Hopper, 2005). The only MAS study of a contemporary large scale agricultural organisation found (a Sri Lankan tea plantation) reported that whilst accounting was used for financial control and external reporting it also reproduced the post-colonial political hegemony over labour in everyday practices of “tea-making” (Alawattage and Wickramasinghe, 2008). Privatizations in South Africa induced MASs that brought harsh controls on workers, rationalised redundancies, and reduced benefits (Catchpowle and Cooper, 1999). MAS market-based reforms do not necessarily reduce corruption and protect stakeholders against undue managerial actions. Third, market serving MASs may not eliminate patronage associated with political factionalism. In the Bangladesh privatized soap company political influence merely took new forms: ministers used regulatory powers to favour investors, and oust militant trade unions in return for management recognising a token government party union and appointing staff recommended by ministers (Uddin and Hopper, 2001). In the Ghana gold mine the government used its minority shareholding and board representation to influence management decisions. Political disputes spilled into the company, e.g. managers were accused of allegiance to the opposition party. When the Head of State, Jerry Rawlings, inspected the mine by midday he expressed dissatisfaction with conditions and replaced the Deputy Managing Director (Tsamenyi and Hopper, 2003). In the Sri Lankan textile mill workers and indigenous managers allied against the new owners and following the mill’s bankruptcy got political leaders to restore state control and reopen the mill during a pre-election period only for it to close shortly after (Wickramasinghe and Hopper, 2005). In the Sri Lankan telecommunications firm disgruntled employees habituated to work in a government department allied with trade union and political leaders frustrated by exclusion from organisational affairs. They got the CEO removed and formal bureaucracy restored by exploiting ministerial powers to appoint board members and, above all, their influence within the regulatory system (Wickramasinghe et al. 2004). Thus MAS changes may perpetuate coercive controls and political patronage, albeit in new guises using new conduits, contrary to the claims of sponsors of reform. For example, when Uddin and Hopper (2003) followed up a World Bank report claiming that a successful batch of Bangladesh privatisations warranted more, they judged only one of the thirteen a commercial success: elsewhere contributions to state revenue declined; transparent external reports required by law failed to materialise; untoward transactions affecting minority shareholders, creditors, and taxation agencies emerged; and more commercial internal controls wrought declining employment, wages, quality of working life, and employee rights. Above all, the paper questioned the narrow criteria of the World Bank report – namely profit – rather than broader development aims. If MAS research is to promote development it must incorporate criteria that transcend commercial and private interests. MAS within NGOs Frustrated by governments’ corruption, political patronage and poor delivery of programmes, many external development providers turned to NGOs[11] – now major players in LDCs. In 1992 international NGOs handled $7.6 billion of aid to LDCs and 30,000 NGOs handle 15 per cent of total development aid. NGOs vary in aims, scope and size but they can be large, influential organisations, e.g. BRAC and Grameen Bank in Bangladesh (Hulme, 2004; Matin et al., 2002). Operational NGOs deliver literacy and clean water projects, consulting, education and training, and finance for the poor; and manufacture and sell goods and services. At their best they possess humanitarian goals; strong grassroots links; field-based development expertise; innovation and adaptability; process-oriented approaches; participation linked to learning; long-term commitment; an emphasis on sustainability; cost-effectiveness, and cross cultural management (Matin et al., 2002). Nevertheless, there are allegations that some NGOs unfairly compete with private organizations; are corrupt; fail operationally; have limited financial and management expertise; are too dependent on charismatic leaders; and their vocal advocacy downplays broader social or economic issues. For example, advocacy NGOs can be vehicles for ideology not assistance; subject to capture by politics; and be unelected and unaccountable (Lehman, 2007). However, whether NGOs’ alleged values of fairness, equity, transparency, participation, learning, sustainability, and social commitments are reproduced in MASs attuned to indigenous cultures and MOPs, efficient service delivery, and minimal political patronage and corruption is unknown. The little research to date suggests that MASs are not central. For example, three Tanzanian NGOs perceived accounting as alien (though impending bankruptcy mitigated this) and used it symbolically to gain legitimacy rather than planning and control, which presented few problems as stakeholders sought more accessible means of societal scrutiny and operational transparency (Goddard and Assad, 2006). Similarly, treasurers in local voluntary organisations in Mauritius used MASs to symbolise rationality to gain external legitimacy from funders who attached little value to accounting data – they preferred engendering trust within “emotional” and informal relations (Soobaroyen and Sannassee, 2007). Thus relationships and accounting concerns within and surrounding NGOs may differ from commercial organisations. For example, members of an Irish overseas aid agency were concerned that its social accounting was corporate rhetoric that downplayed needs to change and stakeholder empowerment in African projects (O’Dwyer, 2005). Moreover, accounting may render NGO practices inconsistent with their aims, e.g. a Zambian microfinance NGO found it supplanted bottom-up accountability and constrained accountability (Dixon et al., 2006); and Traidcraft found “social bookkeeping” did not augment stakeholder accountability as intended but made managers interpret religious principles more commercially (Dey, 2007). NGOs are under-researched within accounting despite sometimes deficient systems for evaluating projects, protecting public deposits, and legal frameworks (see Accounting, Auditing and Accountability Journal, Vol. 19 No. 3, 2006; and O’Dwyer and Unerman, 2007). More MAS research is needed, e.g. on whether NGO’s MASs foster accountability and beneficiaries’ involvement, especially the very poor and women, promotes employee involvement, and avoids coercive controls? Anecdotal reports, especially of large, near commercial NGOs suggest that sometimes they may not. And if they do, then do their MASs reconcile efficient delivery of services and survival with their broader humanitarian values and goals? MAS within public sector organisations LDC states’ and local politics’ roles have been diminished (or altered) by market reforms favouring private organisations, the rise of NGOs, and NPM reforms of government accounting. The latter raise several issues. First, demands for more public Management accounting 493 AAAJ 22,3 494 sector performance information can remain unmet due to low institutional capacity and corruption (Mimba et al., 2007). For example, budget reforms, loan conditions in a World Bank SAP, overwhelmed the Malawi state’s limited capacity to collect and process information. This supports claims that rational long-run planning may be less effective than control using simple, delegated short-run budgets continuously and flexibly; working within actual short-run data and existing resources; avoiding large projects and spreading risk; and tying output controls to rewards (Mserembo and Hopper, 2004). Second, there are change management issues. Diamond (2004) claims international organizations can usually agree on what reforms of auditing standards (an important component of NPM) in government departments are necessary. He commends respecting local audit traditions and implementing changes following his model. Improved implementation might alleviate MAS reform problems noted elsewhere, e.g. by mediating political rivalries during Indonesian local government accounting reforms (Marwata, 2006); overcoming physicians’ resistance in an Egyptian public hospital (Hassan, 2005); and settling disputes between a Chinese hospital with decentralised control and a new MAS to improve information and central planners who set prices below cost (Chu and Rask, 2002). However, problems can transgress change management issues: MAS reforms can have deleterious material effects. For example, using balanced scorecards – a World Bank loan condition – encouraged the Fijian Public Rental Board to sell state housing and charge economic rents, which enhanced national efficiency and wealth but contradicted its mission to house poor people (Sharma and Lawrence, 2005); when external financial institutions introduced a profit oriented MAS in the Fijian Development Bank indigenous Fijians’ protections from settler exploitation and cheap imported Indian labour were removed and racial privileges reinforced (Alam et al., 2004); and MAS changes in state organisations induced by international finance agencies incorporated values, concepts, rationales and practices alien to Kiribati culture bringing major problems (Dixon, 2004). Hence NPM accounting reforms may reproduce an alien hegemony and not increased local autonomy, democracy and accountability, resulting in dubious development gains. NPM emphasises hierarchy, especially managers reporting to political masters, rather than “bottom-up” accountability making public service deliverers responsible to communities served, as in the Ugandan Community-led HIV/AIDS Initiative (Awio et al., 2007). External agencies benchmarking of LDC’s MASs against rich countries’ practices may induce reforms incompatible with indigenous cultures, local democracy, and domestic politics (Rahaman et al., 1997). Moreover, accounting reforms, not least their discourse and language, may encourage states to abandon their development role and mask exploitation (Arnold and Cooper, 1999), e.g. accounting language prioritising “profitability” “affordability” and “accountability” diminished resistance to privatising urban water services in Ghana (Rahaman et al., 2007); and accounting discourse reinforced institutionalised racial discrimination during the financial re-structuring of a Fijian SOE (Davie, 2005). Everett et al. (2007) claim accounting research neglects corruption. Transparency International’s 2005 Corruption Perceptions Index reveals LDCs are frequently the most corrupt. Economists attribute low development rates to corruption that erodes democracy; values of trust and tolerance; the legitimacy and institutional capacity of government; good governance by reducing legislative accountability, representation in policymaking; the rule of law; and brings unfair service provision in public administration. In extremity, corruption represents embezzlement of entrusted funds and diverts domestic financial capital abroad. If commonplace it can become the norm when businesses or citizens interact with government officials and it increases business costs and risks of breached agreements; shields firms with connections from competition; sustains inefficient firms; diverts public investment into unduly complex capital projects where bribes and kickbacks are more plentiful; reduces the quality of government services and infrastructure; increases budgetary pressures on government; and impedes compliance with construction, environmental, or other regulations. Anticorruption organizations, especially the World Bank, United Nations, IMF, OECD, and Transparency International, view accounting’s role in reducing corruption as relatively unproblematic but radical approaches see accounting as potentially an enabler and constrainer of accountability and liberal democracy (Everett et al., 2007). For example, when Malawi local government reforms increasing managerial autonomy met interference, sabotage and corruption from politicians managers regained some autonomy by exploiting NPM-based managerial prerogatives, central government interventions, and corrupt collusions with councillors (Tambulasi, 2007). Accounting cannot resolve all poverty, injustice, and corruption problems but it is a piece in the jigsaw of effective control, regulation, accountability, and the rule of law. Corruption flourishes under low government transparency, no freedom of information legislation, contempt for freedom of speech and the press, absent or dysfunctional democracy, poorly-paid government officials, and illiterate populaces. However, many LDCs lack financial and technical capacity; strong institutions; opaque, democratic and effective budget processes and fiscal controls; and public participation opportunities, which divert resources from social priorities at early budgeting stages, allocation of resources contrary to budget decisions, and false financial statements to mask leakage of public funds. Democratic politics can offset corruption and patronage politics through greater state accountability. This requires state policies, practices and expenditures open to public and legislative scrutiny so civil society can be involved in budget formulation, execution and reporting to hold officials accountable and prosecute irregularities. Such reforms bring results, e.g. the Indian Right to Information Act 2005 “engendered mass movements. . .bringing the lethargic, often corrupt bureaucracy to its knees and changing power equations completely”. (Jakarta Post, 31 August, 2006). Publishing surveys and audit and accountability reports makes corrupt practices more visible, facilitates public monitoring, and challenges cultures of impunity, e.g. publishing monthly intergovernmental fund transfers in the Ugandan local media reduced fund losses by 78 per cent. Information technology has a role, e.g. submitting internet applications and tax returns for computer processing can reduce corruption by reducing interactions with officials, speeding up decisions, and reducing human errors. Thus the design and operation of MASs can strengthen local states and stakeholders’ influence in domestic politics in contrast to market reforms and use of NGOs that bypass them. Conclusions So, “What do we know about MAS in LDCs?” Research is growing, with a broad geographical spread across LDCs at different development stages but is not extensive in any country apart from China. However, many contextual factors and issues are not Management accounting 495 AAAJ 22,3 496 unique to LDCs – it is wrong to ghettoise LDC research as exotic and irrelevant to mainstream accounting research. Nevertheless, LDCs are relatively distinctive as they have a larger residue of traditional cultures and MOPs; their poverty renders them more dependent on external finance, ideologies and structural reforms, with lower institutional capacity to deliver change. This limits locals’ ability to determine political choices and state mechanisms of governance. A primary MAS research aim must be to foster understanding to facilitate local choice rather dictating systems from rich countries premised on possibly alien values, to improve material conditions and quality of life, especially for the most disadvantaged. LDCs have shifted from traditional, often feudal MOPs (though some sectors had MOPs akin to capitalist forms) to socialist state capitalist and then market capitalist. Each embodies distinctive MASs, broadly conceived. The legacy of transition is MOPs in tension with each other and local cultures, reinforced by ethnic differences. Pre-colonial MOPs incorporated traditional cultures, whereas subsequent ones reflect modern values. Local society often supported transition. However, the means were and still are premised on Western practices imposed by external agencies. Research reveals that subsequent MASs in SOEs and government departments often failed to operate as intended, whereas in private companies, especially under market capitalism, they were often adopted with alacrity as they helped secure commercial but not invariably development aims. So how might research progress with regard to the interplay of MOPs, culture, and ethnicity? More needs knowing about MAS and cultures. First, historical studies and ethnographies of traditional sectors (including indigenous peoples in rich countries) need to identify how local cultural attributes are reproduced in distinctive forms of accounting and accountability. Only then can MASs be adapted to local circumstances and preferences. MAS research has much rhetoric on the failure to incorporate local practices but it is weak on revealing what they are. Research concentrates on large organisations, often foreign owned, and neglects indigenous small and micro-organisations where cultures may be more collectivist and inclined to informal trust. We need to ascertain whether the latters’ MASs incorporate local cultures, not least regarding familial values, rights and obligations and their effects. Second, more research is needed on NGOs, especially whether their work with the poor, often in rural agriculture, domestic industry, and micro-enterprises develops effective MASs that resonate with traditional cultures and MOPs whilst delivering the development goals sought. This is almost virgin territory for accounting researchers. Third, research in private companies suggests that economic liberalisation drives MAS development but issues of culture, ethnicity, corruption, coercion, and political patronage still abound. Studies here should assess MASs not merely on economic performance criteria but also against broader development goals. Next we turn to state and regulatory issues. LDCs in this review range from so-called “failed states” with dictators unconcerned with development, sometimes undergoing long-term civil wars or lacking rule of law, to “newly industrialized countries” with advanced economies but lacking some developed country attributes. This makes generalisation difficult but some issues warrant consideration. We need to know more about the catalogue of indifference to MASs in SOEs and some government agencies. The bleakness of MAS research here is surprising given that SOEs’ effectiveness compared to private corporations remains contested. Studies of MASs in effective state organisations might resolve this conundrum. Also, in poor countries greater consideration might be given to simple MASs for control rather than complex long run planning systems. LDCs often have weak regulatory structures – three issues warrant further study. The first concerns labour. State capitalism recognised trade unions and collective bargaining but fused them with parties and politics to the detriment of commercial MASs and efficiency. However, market capitalism has weakened unions and labour, sometimes to the detriment of work conditions, remuneration and employment. Are commercially effective MASs predicated upon weakening labour, and if not, then how are labour-capital conflicts reconciled? Second, MAS deficiencies in local banks and their regulation are major development concerns unaddressed by researchers. Bank failures and capital provision were problematic under state capitalism due partly to weak accounting controls and it is not clear whether market reforms have improved access to credit, especially for the poor. Third, how capital market and financial accounting changes associated with market reforms precipitate MAS change is poorly understood. For example, Egyptian accounting development from 1961 to 1997 was partly related to stock market development and SOE privatization (HassabElnaby et al., 2003); African countries that modified IASs to local conditions had higher economic growth than those ignoring IASs (Larson, 1993) but economic growth, equity market development and IAS adoption were negatively correlated in 27 LDCs (Larson and Kenny, 1995). Only two studies have examined whether capital markets affected MASs either directly or via financial accounting. The first suggested that LDCs with weak capital markets and accounting infrastructure investment avoided high risk projects at a cost to diversification (Lee, 2001); the second found listed companies on the Zimbabwe Stock Exchange that released timely audited final annual reports had more modern technology and stronger internal controls (Owusu-Ansah, 2000). More interchange of capital markets, financial accounting and MAS research in LDCs is needed to integrate research findings and formulate policy. Previous MAS research has concentrated on social and critical theories, possibly because they are open, grounded, process oriented and exploratory; give voice to neglected constituencies; are sensitive to ethnocentricity, and address dynamic political issues ranging from ideology and language to class struggle and globalisation. The scarcity of quantitative work may be attributable to the paucity of published data on MASs, and difficulties obtaining reliable responses from subjects unused to and suspicious of surveys. Exploratory bottom-up methods using case studies have yielded rich pickings and remain apt. However, their preponderance may inadvertently prioritise cultural and political factors over economic ones. Relating MAS change to capital markets and financial accounting may require more aggregated economic and archival work. Larger sample survey studies may identify what Western systems are inapplicable to LDCs – is it in entirety, degree, or just parts, and when, where and how (Baydoun and Willett, 1995). The volume of survey and statistical work in development studies, financial accounting, and finance appertaining to LDCs suggests this is feasible. However, triangulation and eclecticism over theories and research methods is required: research on LDCs is too scarce to be discarded on grounds of methodological predilection. Lastly, we turn to politics. As our review reveals, many accounting problems in LDCs are socio-economic and political not technical (Wallace, 1990). We found no MAS unique to LDCs. Nor does this article prescribe any MAS for LDCs – rather it seeks Management accounting 497 AAAJ 22,3 498 understanding and systems that aid dialogue and choice within local political processes. Two political issues warrant further research. First, more consideration should be given to systems that empower civil society. Often LDCs have powerful governments but weak and corruptible governance. State capitalism encouraged this, but market reforms, especially NPM, may diminish local politics and civil society’s influence. In addition, the turn to NGOs may weaken the state, though not the influence of civil society. The association of MASs with such trends needs investigation: local democracy may outweigh efficiency considerations, especially in the public sector. There is a need to design systems that empower citizens, however disadvantaged, that promote effective governance rather than relying on MASs imported from rich countries. Second, more needs knowing on how external institutions frame MAS policy and practice. Wallace (1990) claims accounting in LDCs is a tale of importation of Western practices and institutions by transnational accounting firms, Western professional associations and consultants, MNOs, international projects, and recommendations of international accounting committees. This raises concern. Hove (1986, 1990) alleges that standardised accounting will fail LDCs as it favours colonialism, powerful foreign investors and professional accountancy institutions from the developed world. For example, MNOs not local companies’ influenced Fiji’s adoption of IASs (Chand, 2005). Accounting, including MASs, in many LDCs remains influenced by professional associations from former imperial powers (see Auditing, Accounting and Accountability Journal, 1999, No. 3), often acting within a constellation of transnational governance agencies, aid institutions, treaties, professional and consulting firms, and MNOs. Their lobbies in Europe and the USA create a global market for accounting and auditing services through World Trade Organization agreements that negate domestic regulations, licensing and qualification requirements, and technical standards reduce domestic regulation and democratic economic governance (Arnold, 2005). Similarly, multinational audits promote globalization and their commercialization facilitates audit firms’ diversification into advisory services (Barrett et al., 2005). We know international capital providers influence MAS reforms in LDCs but not much on how, by whom, on whose behalf, and its consequences within everyday practices. An exception is Wickramasinghe et al. (2007) who claimed the Chartered Institute of Management Accountants diffusion of balanced scorecards in Sri Lanka typified attempts to globalise Western MAS knowledge. It failed in the firm investigated due to professional rivalries, the rise of alternative fads or techniques, and the owner’s reluctance to relinquish older financial tools. Also, many MAS reforms emanate from international financiers like the World Bank, the IMF, and the United Nations. Studies of Delco in Sierra Leone and a Latin American education project claim that World Bank practices and discourses promote neo-liberalism, globalize Western financial practice, and deny local experience (Neu and Ocampo, 2007), and accounting in loan agreements re-structure governance mechanisms bringing financial technologies alien to LDCs’ customs whilst reaffirming the World Bank’s expertise, legitimacy and influence (Neu et al., 2006). Saravanamuthu (2004) alleges that World Bank accounting cannot reconcile competing stakeholder needs as it emphasises economic necessities and neglects social and environmental degradation. However, Annisette (2004) claims this ignores institutional pressures on the Bank to manage the global economy on private international capital’s behalf. Concern about international capital providers has provoked calls for greater scrutiny of their knowledge diffusion role, who they serve and how, and research on the IMF’s accountability and transparency; how it monitors debtor nations and projects; its links with the finance industry; and accounting firms’ role in IMF programs (Arnold and Cooper, 1999). Politics surrounding MAS reforms in LDCs transgress their boundaries and include a constellation of institutions whose processes and effects remain poorly understood. The politics of governance is not just a poor country problem: rich countries, especially Luxembourg, Switzerland, the UK, and the USA are net recipients of capital inflows from LDCs without resources and institutions to effectively regulate financial transgressions. Rich countries must make corrupt business practices abroad illegal and subject to domestic audit with meaningful sanctions for transgressions; and enforce legislation, often from the United Nations, on capital flows into bank accounts, reduced bank secrecy, transparent MNO accounts, regulating on-shore and off-shore tax havens, sharing taxation returns with other countries, international transfer pricing regulations, and protecting “whistleblowers”. MNOs, especially extractive ones, have particular responsibilities. The exploitation of societies lacking capitalist values or institutions, effective regulation, and symmetrical bargaining power raises major ethical issues for MNOs operating overseas, their managers, governments hosting MNO headquarters, international capital markets and accountants to fairly, transparently and accurately assess profits, commissions and taxes due in particular locales; help LDC governments strike economically sound contracts with MNOs; and prevent environmental and social degradation. Caveat emptor cannot prevail in inequitable situations. Professional responsibilities of accountants, businesses, and MAS researchers transcend borders and should incorporate ethical and humanitarian dimensions in the public interest. They should actively support NGO campaigns like “Publish What You Pay” launched in 2002 seeking greater audited, transparent payments, receipts, and management of revenues from the extractive sector; for discrepancies to be reconciled; more effective use of resources within LDCs; greater combating of corruption; and improved corporate social responsibility. MAS research has a political dimension to prevent market-based regimes reverting to political patronage and coercive controls. Notes 1. Needles (1994) classified research on Asia-Pacific countries from 1965 to 1990 by country, methodology, and subject over five-year periods but just 3 of the 100 papers are MAS. Needle’s second review (1997) of International Journal of Accounting Research articles from 1965 to 1996 found only 6 of 126 were MAS: five deductive and descriptive, and one empirical. 2. In LDCs external institutions and governments often commission policy papers from local academics or consultants – alternative academic research funding is negligible and dividing academic and practice is an unaffordable luxury. 3. The World Bank uses Gross National Income (GNI) criteria to categorise economies according to four stages of development: low income ($905 or less); lower middle income ($906-$3,595); upper middle income ($3,596-$11,115); and high income ($11,116 or more). 4. The United Nations (UN) has two widely accepted indices. The human development index (HDI) measures three dimensions: life expectancy, educational attainment and adjusted real income ($ per person). The human poverty index (HPI) measures deprivation using four indices: percentage of people expected to die before age 40; percentage of illiterate adults; Management accounting 499 AAAJ 22,3 500 percentage of people without access to health services and safe water; and percentage of underweight children under five. It classifies economies into four categories: LDCs (50); developing economies (168); economies in transition (20); and developed economies (42). 5. Two similar frameworks were found. Gray (1989) identifies how global factors, culture and politics, history, religion, professional associations, capital markets, and legal systems influence national and international accounting. These broadly correspond with factors in our framework. However, Gray’s model is oriented to financial accounting (but touches on MNO controls and transfer pricing), only tangentially addresses LDCs, is oriented to statistical testing of dubious validity (e.g. Hofstede’s (1980) measures of national cultures), and neglects transformation. Olowo-Okere and Tomkins (1998) identify three evolutionary stages of government financial controls in the UK and Nigeria, and attribute ineffective financial changes in Nigeria to external pressures from the World Bank and IMF, internal political instability, political ideology, the economic climate, and financial stress. Their model is confined to Nigeria and government accounting but its dynamic, evolutionary and contingent stages resonate with our own. 6. Now Thailand, one of few non-Western countries to escape colonialism. 7. Ensuing regimes of control are labelled “colonial” because one racial group dominated through political, legal and economic rights denied to others (Spearpoint, 1937), and “despotic” because management controls tended to be arbitrary, racial, physical, and coercive. Despotic controls are also hegemonic as they secure consent by legitimizing capitalism and downplay other stakeholders’ influence (see Ezzamel et al., 2008). 8. Defined as “the fusion of monopoly forces with the bourgeois state to form a single mechanism of economic exploitation and political domination” (Jessop, 1982, p.32). 9. This is when a particular group assumes power and advances their positions through goals and agendas not shared by other sectors of society, i.e. they pursue self interest at the expense of the common good. Leadership is often personality based and power maintained through exploiting offices and patronage. 10. NGOs form social movements within civil society, providing services and advocacy. 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(1989), “Accounting in LDCs: a case for localised uniformity”, British Accounting Review, Vol. 21 No. 2, pp. 141-58. Reinikka, R. and Svensson, J. (2002), Assessing Frontline Service Delivery, Development Research Group, World Bank, Washington, DC. Appendix 1. Papers on management accounting research in LDCs by countries (75) Africa (22) Algeria (2) Jones and Sefiane, 1992; Ouibrahim and Scapens, 1989. Egypt (3) Hassan, 2005; Kholeif et al., 2007; Van-Triest and Elshahat, 2007. Ghana (5) Rahaman and Lawrence, 2001; Tsamenyi et al., 2002; 2004, n.d.; Uddin and Tsamenyi, 2005. Malawi (2) Mserembo and Hopper, 2004; Tambulasi, 2007. Mauritius (1) Soobaroyen and Sannassee, 2007. Nigeria (3) Asechemie and Ikeri, 1999; Olowo-Okere, 1999; Olowo-Okere and Tomkins, 1998). Management accounting South Africa (1) Waweru et al., 2004. Tanzania (2) Goddard and Assad, 2006; Satta, 2006. Uganda (1) Awio et al., 2007. Zambia (1) Dixon et al., 2006. Africa general (1) Asechemie, 1997. Asia (38) Bangladesh (8) Alam, 1997; Alam and Lawrence, 1994; Hoque, 1995; Hoque and Hopper, 1994, 1997; Rahman, and Scapens, 1986; Uddin, n.d.; Uddin and Hopper, 2001. China (17) Bromwich and Wang, 1991; Chalos and O’Connor, 2004, 2005; Chan and Chow, 2001; Chan and Lee, 1997; Chan et al., 2001; Chu and Rask, 2002; Lin and Yu, 2002; Firth, 1996; Liu and Pan, 2007; Maschmeyer and Ji-Liang, 1990; O’Connor et al., 2004, 2006; Scapens and Ben-Ling, 1995; Scapens and Yan,1993; Skousen and Yang, 1988; Yan and Gray,1994. India (1) Anderson and Lanen, 1999. Indonesia (3) Efferin and Hopper, 2007; Marwata, 2006; Tsamenyi et al., 2008. Malaysia (2) Chun, 1996; Tales and Sofian, 2007. Pakistan (1) Ansari and Bell, 1991. Sri Lanka (5) Alawattage and Wickramasinghe, 2008; Jayasinghe and Wickramasinghe, 2007; Wickramasinghe and Hopper, 2005; Wickramasinghe et al., 2004, 2007. Thailand (1) Virameteekul et al., 1995. Pacific (3) Fiji (2) Alam et al., 2004; Sharma and Lawrence, 2005. 511 AAAJ 22,3 Kiribati (1) Dixon, 2004. Latin America (7) Brasil (1) Guerreiro et al., 2006. 512 México (2) Frucot and Shearon, 1991; Leach-Lopez et al., 2007. Unspecified or various (2) Collins et al., 1997; Neu et al., 2006. Venezuela (1) Rivera, 1982. West Indies (1) Cowton and O’Shaughnessy, 1991. Middle East (2) Palestine (1) Kattan et al., 2007. Syria (1) Abdeen, 1980). Global (3) Borkowski, 1997; Cools et al., n.d.; Satta, 2004. Appendix 2. Papers on management accounting in LDCs by topic (75) Management accounting and control in SOEs and privatisations (29) Alam, 1997; Alam and Lawrence, 1994; Alam et al., 2004; Bromwich and Wang, 1991; Hoque, 1995; Hoque and Hopper, 1994, 1997; Jones and Sefiane, 1992; Kholeif et al., 2007; Lin and Yu, 2002; Maschmeyer and Ji-Liang, 1990; O’Connor et al., 2004, 2006; Olowo-Okere, 1999; Ouibrahim and Scapens, 1989; Rahaman and Lawrence, 2001; Scapens and Ben-Ling, 1995; Scapens and Yan, 1993; Sharma and Lawrence, 2005; Skousen and Yang, 1988; Tsamenyi et al., 2002, 2004, n.d.; Uddin and Hopper, 2001; Uddin and Tsamenyi, 2005; Van-Triest and Elshahat, 2007; Waweru et al., 2004; Wickramasinghe and Hopper, 2005; Wickramasinghe et al., 2004. Large private companies and MNOs (10) Anderson and Lanen, 1999; Chan and Lee, 1997; Chun, 1996; Collins et al., 1997; Frucot and Shearon, 1991; Guerreiro et al., 2006; Leach-Lopez et al., 2007; Liu and Pan, 2007; Rivera, 1982; Tales and Sofian, 2007. MNOs – transfer pricing (5) Borkowski, 1997; Chan and Chow, 2001; Cools et al., n.d.; Rahman and Scapens, 1986; Virameteekul et al., 1995; Joint ventures (with foreign companies) (4) Chalos and O’Connor, 2004, 2005; Firth, 1996; Yan and Gray, 1994. Indigenous SMEs (6) Ansari and Bell, 1991; Efferin and Hopper, 2007; Kattan et al., 2007; Tsamenyi et al., 2008; Uddin, n.d.; Wickramasinghe et al., 2007. Management accounting Plantations and agriculture (3) Alawattage and Wickramasinghe, 2008; Asechemie, 1997; Cowton and O’Shaughnessy, 1991. Microfinance (4) Dixon et al., 2006; Jayasinghe and Wickramasinghe, 2007; Satta, 2004, 2006. Household accounting (2) Asechmie and Ikiri, 1999; Chan et al., 2001. Governmental accounting (10) Abdeen, 1980; Awio et al., 2007; Chu and Rask, 2002; Dixon, 2004; Hassan, 2005; Marwata, 2006; Mserembo and Hopper, 2004; Neu et al., 2006; Olowo-Okere and Tomkins, 1998; Tambulasi, 2007). NGOs (2) Goddard and Assad, 2006; Soobaroyen and Sannassee, 2007. Appendix 3. Research methods used in management accounting in LDCs (75) Case studies – from observations through interviews to documentary analysis (47) Abdeen, 1980; Alam, 1997; Alam and Lawrence, 1994; Alam et al., 2004; Alawattage and Wickramasinghe, 2008; Ansari and Bell, 1991; Asechemie, 1997; Awio et al., 2007; Chan and Lee, 1997; Chan et al., 2001; Chu and Rask, 2002; Cools et al., n.d.; Dixon, 2004; Dixon et al., 2006; Efferin and Hopper, 2007; Goddard and Assad, 2006; Guerreiro et al., 2006; Hassan, 2005; Hoque and Hopper, 1997; Jayasinghe and Wickramasinghe, 2007; Jones and Sefiane, 1992; Kattan et al., 2007; Kholeif et al., 2007; Lin and Yu, 2002; Liu and Pan, 2007; Marwata, 2006; Neu et al., 2006; Olowo-Okere, 1999; Olowo-Okere and Tomkins, 1998; Ouibrahim and Scapens, 1989; Rahaman and Lawrence, 2001; Rahman and Scapens, 1986; Satta, 2006; Sharma and Lawrence, 2005; Tambulasi, 2007; Tsamenyi et al., 2002, 2004, 2008, n.d.; Uddin, n.d.; Uddin and Hopper, 2001; Uddin and Tsamenyi, 2005; Waweru et al., 2004; Wickramasinghe and Hopper, 2005; Wickramasinghe et al., 2004, 2007; Yan and Gray,1994. Field study and questionnaires (8) Anderson and Lanen, 1999; Chalos and O’Connor, 2004, 2005; Chan and Chow, 2001; Hoque, 1995; Hoque and Hopper, 1994; Soobaroyen and Sannassee, 2007; Tales and Sofian, 2007. Questionnaires (10) Borkowski, 1997; Chun, 1996; Collins et al., 1997; Firth, 1996; Frucot and Shearon, 1991; Leach-Lopez et al., 2007; O’Connor et al., 2004, 2006; Van-Triest and Elshahat, 2007; Virameteekul et al., 1995. Desk study and documentary analysis (10) Asechemie and Ikiri, 1999; Bromwich and Wang, 1991; Cowton and O’Shaughnessy, 1991; Maschmeyer and Ji-Liang, 1990; Mserembo and Hopper, 2004; Rivera, 1982; Satta, 2004; Scapens and Ben-Ling, 1995; Scapens and Yan, 1993; Skousen and Yang, 1988. 513 AAAJ 22,3 Appendix 4. Theorising management accounting in LDCs (75) Economics (3) Chan and Chow, 2001; Maschmeyer and Ji-Liang, 1990; Rahman and Scapens, 1986. Development economics (2) Satta, 2004, 2006. 514 Ethnography/grounded theory/action/hermeneutics (11) Ansari and Bell, 1991; Awio et al., 2007; Dixon, 2004; Efferin and Hopper, 2007; Goddard and Assad, 2006; Jayasinghe and Wickramasinghe, 2007; Liu and Pan, 2007; Marwata, 2006; Rahaman and Lawrence, 2001; Tsamenyi et al., 2008; Wickramasinghe et al., 2007). Governmentality (Foucault/Bourdieu/structuration theory/accountability) (5) Dixon et al., 2006; Jones and Sefiane, 1992; Neu et al., 2006; Ouibrahim and Scapens, 1989; Uddin and Tsamenyi, 2005. Labour process/political economy/Gramscian (10) Alam et al., 2004; Alawattage and Wickramasinghe, 2008; Asechemie, 1997; Hoque and Hopper, 1994; Olowo-Okere, 1999; Olowo-Okere and Tomkins, 1998; Uddin, n.d.; Uddin and Hopper, 2001; Wickramasinghe and Hopper, 2005; Wickramasinghe et al., 2004. Institutional theory (4) Firth, 1996; Hassan, 2005; Kholeif et al., 2007; Soobaroyen and Sannassee, 2007. Institutional theory and contingency theory (6) Alam, 1997; Alam and Lawrence, 1994; Cools et al., n.d.; Guerreiro et al., 2006; Hoque and Hopper, 1997; Sharma and Lawrence, 2005). Contingency theory/RAPM/statistical (12) Anderson and Lanen, 1999; Chalos and O’Connor, 2004, 2005; Chun, 1996; Collins et al., 1997; Frucot and Shearon, 1991; Hoque, 1995; Kattan et al., 2007; Leach-Lopez et al., 2007; O’Connor et al., 2004, 2006; Waweru et al., 2004. Public administration (2) Mserembo and Hopper, 2004; Tambulasi, 2007. GST/social psychology (1) Yan and Gray, 1994. No explicit theory (19) Abdeen, 1980; Asechemie and Ikiri, 1999; Borkowski, 1997; Bromwich and Wang, 1991; Chan and Lee, 1997; Chan et al., 2001; Chu and Rask, 2002; Cowton and O’Shaughnessy, 1991; Lin and Yu, 2002; Rivera,1982; Scapens and Ben-Ling, 1995; Scapens and Yan, 1993; Skousen and Yang, 1988; Tales and Sofian, 2007; Tsamenyi et al., 2002, 2004, n.d.; Van-Triest and Elshahat, 2007; Virameteekul et al., 1995. Corresponding author Trevor Hopper can be contacted at: trevor.hopper@manchester.ac.uk To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints

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