Three studies about management accounting and control in small firms

Abstract

Lower survival rates of small firms could be explained by inadequate financial decisions. Small firm decisions are made at the intersection between managerial features and the information available. Then, this Ph.D. is mainly compound for three main different studies (Chapter II, Chapter IV and Chapter V) which connect financial literacy, intuition (manager´s characteristics), and management and accounting control systems (which gather the relevant information for decision-making) with the most important financial decisions of small firms (financial leverage, investment, and cash holdings). Chapter II is a systematic literature review of FL in small firms, which is a topic that remains underexplored. Chapter II helps to synthesize all of the available knowledge in this field and to provide an agenda for further research. Moreover, it suggests that financial literacy (FL) is a driver of both management and accounting control systems (MCS), and financial decisions are the theoretical base for Chapter IV. Then, Chapter IV helps to clearly identify the relationship between these variables and adds new evidence to the mounting literature on the adjustment of financial leverage by examining the association between (financial and non-financial) management control systems (MCS) and financial leverage and the potential interaction of FL. Finally, Chapter V emphasizes the interaction between information (accounting [financial] MCS) and the manager´s predominant cognitive reasoning (intuition). This relationship provides new evidence on how small businesses can mitigate the trade-off between investment and cash holdings where financial constraints prevail, which is an issue of financial management currently rarely studied yet. Overall, this Ph. D contributes to the literature corpus of management, accounting, and finance by providing new insights into the financial decision-making in small firms that are highly dependent on the manager´s characteristics and the information available. This intersection held the small firm management accounting and control and is fundamental for financial manage it. The proposed hypotheses of Chapters IV and V are tested by using survey and archival data from a sample of small businesses.