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Title: The impact of privatisation on management accounting control systems :a case study of two Saudi Arabian privatised companies
Authors: Alroqy, Faisal A.
Issue Date: 2011
Publisher: Newcastle University
Abstract: Most of the literature on management control systems (MCSs) shows that state-owned enterprises (SOEs) lack autonomy, do not have clearly defined objectives, and therefore have inadequate accounting systems, accountability, and control systems. Whilst some researchers claim that privatisation per se should improve this aspect of enterprise performance and accountability, others argue that change cannot be brought about without accompanying structural, cultural and external environment changes. As a result of its economic reform policy, governmental development plans, the need to join the WTO, and the need to overcome the poor performance and ineffectiveness of certain industries, the Saudi Arabian Government privatised some of its SOEs. This study is an exploratory investigation into the effect of such policy on two selected organisations and their MCSs in Saudi Arabia. Its main objective is to describe the nature of control systems before privatisation and determine the impact it has subsequently had on the companies in question. In addition, it investigates whether privatisation was the only reason for change or whether there were other influencing factors. The case study was conducted within two Saudi companies that have been privatised recently, viz., the Saudi Telecom Company and the Saudi Electricity Company. For triangulation purposes, the case study employed three modes of data collection: semi-structured interviews, examination of classified official corporate documents, and semi-structured interviews with an external related party (the Saudi Investment Authority). The main finding of the study is that privatisation alone cannot change MCSs: without changes in organisational structure, culture and the external environment, the privatisation process cannot effectively achieve its objectives. The study found out that although both companies were privatised, changes in their respective control systems were different for three main reasons. (1) The degree of competition: the telecommunication sector becomes more competitive and therefore the Telecom Company had to develop very efficient control systems so it could compete in the market. However the Saudi Electricity Company continued to dominate the market and as result there was no strong motive to apply stringent MCS. (2) Managerial power within the two organisations: Whereas in Saudi Electricity engineering managers were dominant and therefore highly influential on the kind of changes the company was seeking, in the Saudi Telecom Company accounting managers dominated and were very different in their attitude towards changing control systems. (3) Government involvement: Saudi Electricity had very limited autonomy since the Government was still the main decision maker on factors such as pricing and policy, whereas Saudi Telecom had a considerable level of autonomy in its policy making.
Description: PhD Thesis
Appears in Collections:Newcastle University Business School

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