The effect of Firm Characteristics on the Relationship between Accounting Risk Management and Performance of State Enterprises in Uganda

Abstract

The broad objective of this research was to determine the effect of accounting risk management, the mediating influence of the internal controls, and the effect of firm characteristics on the relationship of firm performance of state enterprises in Uganda. The specific objectives were; to examine the relationship between accounting risk management and performance of state enterprises in Uganda; to determine the moderating effect of firm characteristics on the relationship between accounting risk management and performances of state enterprises in Uganda and to assess the joint effect of accounting risk management, firm characteristics and internal controls on the performance of state enterprises in Uganda. This study was anchored on the positivist paradigm since it is rational and objective and is generally characterized by the formulation and testing of the hypotheses. The population comprised 34 state enterprises from 11 sectors, however, 32 responded, reflecting a response rate of 94 percent. Secondary data was collected for a five-year period from 2015 to 2019.  Both primary used semi-structured questionnaires and secondary data was derived from annual final accounts of state enterprises and annual indices report from Transparent International Uganda for Corruption Perception Indices. The unit of analysis was state enterprises and the unit of inquiry were, Chief Executive Officers, Finance Managers, Chief internal auditors, Human Resource Managers, and Procurement Managers. The methodology used a descriptive and cross-sectional survey design to get information from state enterprises. Cronbach coefficient assessed the internal consistency and items of α ≥ 0.7 were considered. Equally, a validity index with ≥ 0.7 was also considered. The diagnostic test; tested the relationship between the variables; normality was tested using P-P Plots, histogram, and Shapiro-Wilk test; multi-collinearity, was tested using Variance Inflation Factor (VIF) of < 10, tolerance statistics between 0-10 and Conditional Index Number <30. Homoscedasticity was tested by the plot of residuals and Levene the test-the equality of variances tested the null hypothesis.  The findings showed accounting risk management had a significant influence on the performance of state enterprises; there was a significant intervening effect of internal controls on this relationship; there was no moderating effect of firms’ characteristics on the relationship; and there was a joint effect of accounting risk management, internal controls and firms ‘characteristics on performance of state enterprises. Through this study, it is recommended that managers of state enterprises should consider aggressive accounting risk management practices to maximize the use profitability, liquidity, managerial efficiency, budgetary controls and reduction frauds so as to improve their performance. Therefore, it is prudent that accounting risk management practices and firm characters be embraced to increase profitability of state enterprises.

Key words: Accounting risk management, firm characteristics, internal controls and firm performance, state enterprises