Debt Pressure and Interactive Use of Control Systems: Effects on Cost of Debt

67 Pages Posted: 4 Jan 2016 Last revised: 30 Oct 2017

See all articles by Beatriz Garcia Osma

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration; European Corporate Governance Institute (ECGI)

Jacobo Gomez-Conde

Universidad Autónoma de Madrid - Accounting Department

Elena de las Heras

Universidad Autónoma de Madrid

Date Written: October 30, 2017

Abstract

We study if debt pressures drive the use of interactive management accounting and control systems (MACS) and its consequences. We build on Simons (1990) and argue that financing pressures can threaten strategic investment. To alleviate debt pressures and reduce information asymmetries with lenders, managers are predicted to increase the interactive use of MACS. However, because individual MACS have different features, we expect that not all interactive use of individual MACS equally serves to assuage debt pressures. We predict that firms facing high debt pressure interactively use traditional MACS and that when individual MACS use befits the level of debt pressure, firms benefit by experiencing future decreases in their cost of debt. Our findings confirm these predictions. We contribute to the literature by showing that pressures from external stakeholders influence interactive use. We also suggest a new relevant firm outcome affected by MACS use: the future cost of debt. Finally, in additional analyses, we show that concerns over innovation may lead managers to choose apparently non-optimal MACS for interactive use, consistent with managers often juggling conflicting pressures.

Keywords: debt pressure; interactive use; management accounting and control systems; cost of debt; innovation; levers of control

JEL Classification: M41

Suggested Citation

Garcia Osma, Beatriz and Gomez-Conde, Jacobo and de las Heras, Elena, Debt Pressure and Interactive Use of Control Systems: Effects on Cost of Debt (October 30, 2017). Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2710336 or http://dx.doi.org/10.2139/ssrn.2710336

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jacobo Gomez-Conde (Contact Author)

Universidad Autónoma de Madrid - Accounting Department ( email )

Campus de Cantoblanco
Madrid, Madrid 28049
Spain

Elena De las Heras

Universidad Autónoma de Madrid ( email )

Avda. Fco. Tomas y Valiente 5
Madrid, Madrid 28049
Spain

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