An Overview and Assessment of MA Research in China (1997-2005)

This report provides an in-depth overview and assessment of management accounting research in China, analyzing 283 articles published in 18 major Chinese academic journals between 1997 and 2005. The study highlights significant shifts in topic mixes across different periods and identifies normative/conceptual papers as the dominant research method, followed by case studies, surveys, and other methodologies. It notes a lack of explicit theory application in a substantial portion of the articles and considerable overlap between topical coverage and managerial concerns. The research further examines the journals' selection criteria and factors influencing Chinese scholars' research capabilities, incentives, and focus. The report concludes by identifying shortcomings that limit the reliability and generalizability of the findings, and suggests possible avenues for future development in the field, providing valuable insights for both Chinese and international scholars interested in collaboration and advancing management accounting research in China. The research also provides a critical evaluation of the empirical studies using criteria such as construct validity, internal validity, external validity, and reliability.

129
JOURNAL OF MANAGEMENT ACCOUNTING RESEARCH
Volume Twenty, Special Issue
2008
pp. 129–164
An Overview and Assessment of
Contemporary Management
Accounting Research in China
Rong-Ruey Duh
National Taiwan University
Jason Zezhong Xiao
Cardiff University
Chee W. Chow
San Diego State University
ABSTRACT: This paper provides an overview of 283 management accounting articles
published in 18 major Chinese academic journals from 1997 to 2005. We find signifi-
cantly different topic mixes between the periods 1997 to 2001 and 2002 to 2005.In
terms of research method, normative / conceptual papers dominate in both subperiods,
followed in descending order by case studies, surveys, field-archivalstudies, and an-
alyticalmodeling research. About 80 percent of the papers do not have any explicit or
detectable application of theory. Finally, considerable overlap exists between the arti-
cles’ topicalcoverage and issues considered important by managers. Overall, due to
lack of theory application and other methodologicallimitations, this literature has not
yet built a strong basis for understanding and leading management accounting devel-
opment in China. Thus, we further examine the journals’ selection standards and pro-
cesses, as wellas factors that may have influenced Chinese scholars’ research ability,
incentives, and focus. We conclude by offering suggestions for future development.
Keywords: management accounting research; China.
INTRODUCTION
Since China embraced privatization and market reform in 1978, Chinese firms have
gained global importance as suppliers, competitors, customers, partners, and targets
of foreign investment (OECD 2005; Roberts and Engardis 2006). This development,
in turn, has spurred interest in understanding Chinese firms’ management practices. Over
the years, a number of studies have appeared in the international (English) literature de-
scribing or analyzing Chinese firms’ management accounting (MA) practices (e.g., Skousen
and Yang 1988; Bromwich and Wang 1991; Scapens and Meng 1993; Firth 1996; Chalos and
O’Connor 2004; O’Connor et al. 2004, 2006; Chow et al. 2007). While these studies have
contributed useful findings, they have only looked at limited aspects of the phenomenon.
The authors are indebted to two anonymous reviewers and the editor for many helpful suggestions for improving
this paper.

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Journal of Management Accounting Research, Special Issue 2008
Furthermore, they have almost exclusively been survey based and as such, lack the ability
to explore in depth the nature of processes or issues of ‘‘how’’ and ‘‘why’’ (Yin 1994).
Among the reasons underlying the limited scope and size of this (English language)
literature, perhaps one of the most important is the language barrier. While there is a
countrywide push for English learning, the number of Chinese company employees with
a good command of English is still low. A related obstacle is that internal documents of
Chinese business enterprises (except for joint ventures) tend to be in Chinese. Perhaps no
less important, Chinese companies are as yet not accustomed to opening themselves to
outside researchers. Rather, gaining such access requires good interpersonal relationships
built over an extended period (‘‘guanxi’’) (O’Connor et al. 2004).
Taken together, these factors suggest that at least for some time, the primary source of
knowledge about Chinese firms’ MA practices will remain the scholars / writers residing and
working in China. The objective of this article is to give individuals who do not read
Chinese an overview of the MA research published in China. Beyond describing charac-
teristics of this literature like topic coverage, methods, and theories, we identify many
shortcomings that limit the reliability and generalizability of its findings. 1 We further ex-
plore factors that may have affected the supply and screening of Chinese MA research, and
suggest possible directions for future development. Beyond assisting the advancement of
Chinese MA research, this report also can help Chinese and foreign scholars to identify
opportunities for collaboration.
We limited this review to the major Chinese academic journals that publish MA re-
search. We assumed that these outlets would tend to uphold higher quality standards, and
thus their content would be more accurate and reliable. To develop the list of journals for
inclusion, we asked senior accounting faculty of ten major Chinese universities to identify
the core journals that their institutions used for personnel decisions.2 The following 18
journals came from aggregating their responses. While some of these (e.g., Accounting
Research, Auditing Research) have an obvious accounting focus, others (e.g., China Man-
agement Science, Economic Science) cover a range of business-related topics.
(1) Accounting Research
(2) Auditing Research
(3) Banking Research
(4) China Accounting and Finance Review
(5) China Management Science
(6) China Soft Sciences
(7) Economic Research
(8) Economic Science
(9) Economic Theory and Economic Management
(10) Finance and Accounting 3
1 Chow et al. (2007) also review studies of MA in China published in both English and Chinese journals. However,
beyond being much smaller in scale, their review emphasizes summary and description, whereas the present
review stresses critically assessing the literature’s coverage, depth, relevance to practice, and theoretical and
methodological adequacy.
2 Five of these are comprehensive universities that have the largest numbers of key academic disciplines in
economics and management conferred by the Ministry of Education. These are Nankai, Fudan, Wuhan, Tsinghua,
and Peking. The other five are the first ones authorized by the government to offer an accounting Ph.D. program:
Xiamen, Renmin, Northeast University of Finance and Economics, Shanghai University of Finance and Eco-
nomics, and Central South University of Finance and Economics.
3 Finance and Accounting has been treated as a practitioner journal by some major Chinese universities in recent
years, but before 2005 (the last year covered by our survey), it was a major outlet of MA papers written by
Chinese academics. This still is the case and the trend may well continue for some time into the future.

An Overview and Assessment of Contemporary Management Accounting Research in China 131
Journal of Management Accounting Research, Special Issue 2008
(11) Finance and Economic Research
(12) Management Science
(13) Management World
(14) Nankai Economic Research
(15) Nankai Business Review
(16) Peking University Journal (social science edition)
(17) Public Finance Research
(18) Tsinghua University Journal (social science edition)
To balance comprehensiveness and currency of coverage, we collected all MA-related
articles published in these journals for the period 1997–2005. The year 1997 was selected
as the starting point because it marked a major change in thinking in China’s central
government, which wields absolute power over how economic activities in the country are
conducted.4 We concluded with 2005 because this was the last year for which complete
volumes for all 18 journals were available at the time of data collection (late 2006). 5 We
also sought to identify trends in various attributes of the published studies (e.g., topics,
method, use of theory), but because there existed considerable year-to-year variations, we
divided the 1997–2005 time span into 1997–2001 and 2002–2005 subperiods to smooth
out transient effects. China became a member of the World Trade Organization in 2001.
This has brought requirements for substantially increased market openness, reduced gov-
ernment interference, and increased management autonomy. Open-end mutual funds also
became available in China in 2001, and have since become important participants in the
Chinese stock market. Meanwhile, government actions to strengthen the role of external
participants in corporate governance, investor protection, and shareholder activism have
accelerated.6 Developments like these are likely to have increased Chinese firms’ incentives
and ability to improve their MA practices, in turn possibly affecting Chinese researchers’
topic choices and access to data.
We followed Luft and Shields (2003, 172) in defining MA as accounting in the man-
agement of organizations. Thus, we excluded measurement and recognition criteria / stan-
dards for financial reporting, auditing, or taxation. We then followed Shields (1997) to
classify the articles by topic, method, theory, and setting. To categorize the articles by
research method, we defined normative / conceptual papers as ones that develop ideas or
4 During the 15th National Congress of the Communist Party of China (CPC) held in that year, the then Secretary-
General of the CPC, Jiang Zeming, ushered in an ideological breakthrough by calling for experimenting with
all forms of ownership that can be used to advance socialist productive forces (Jiang 1997). In particular, Jiang’s
report paved the way for politically and ideologically accepting joint-stock companies as a means of transforming
the thousands of state-owned enterprises and organizing societal resources. An indication of this ideological
change’s importance is the increase of listed companies from 745 in 1997 to 1,377 by the end of 2004. In the
management accounting arena, the Accounting Society of China, which hitherto had focused its activities on
financial accounting and reporting, organized in 1997 for the first time a national contest in management ac-
counting research. The Society again organized a national best papers contest in 1999 and established a Man-
agement Accounting Special Interest Section in that year.
5 Given the direction of developments that we observe, we have to acknowledge the possibility that articles
published after 2005 may exhibit a different pattern from those of the earlier years. However, given the relatively
small number of MA articles published in each year, our overall conclusions are unlikely to be materially
affected.
6 For example, the China Securities Regulatory Commission issued ‘‘Guidelines for Establishing an Independent
Directors System for Listed Companies’’ in August 2001 and the ‘‘Code of Corporate Governance for Listed
Companies in China’’ in January 2002. These regulations imposed explicit requirements for the appointment of
qualified independent directors on corporate boards, prohibited the appointment of controlling shareholders and
associated parties to be directors, and conferred greater powers on the independent directors for monitoring
related parties transactions and for the appointment and dismissal of auditors, directors, and senior executives.

132 Duh, Xiao, and Chow
Journal of Management Accounting Research, Special Issue 2008
arguments without using data or modeling (Maher 2001). Case studies are research under-
takings that involve the observation in natural settings of policies, practices, people, struc-
ture, and context within a single organization (Birnberg et al. 1990; Yin 1994). A field-
archival study is similar to a case study except that the data of interest are publicly available
through, for example, databases. A survey study typically involves using questionnaires to
collect data from respondents in a sample of organizations (Kerlinger and Lee 2000;
Birnberg et al. 1990). An analytical modeling study is defined as one that involves math-
ematical proof of propositions or searching for solutions through, for example, optimization
techniques.
Beyond showing the distribution of articles across several attributes (e.g., topic cover-
age, setting), we critically evaluated the empirical studies using the criteria of construct
validity, internal validity, external validity, and reliability (Abdel-khalik and Ajinkya 1979;
Birnberg et al. 1990; Van der Stede et al. 2005; Yin 1994). 7 For analytical modeling re-
search, we followed Demski (2007) in examining the research question, preparation of the
model, and ability to satisfy the Ralph test. As Demski explains, a well-prepared model is
one that can answer the question that it poses. Thus, for example, it would be meaningless
to ask a model that assumes certainty what information is needed. As for the Ralph test, a
study is seen as passing this test to the extent that its central question is of classroom
importance and the answer that it provides is useful.
In total we found 283 MA articles, most of which had appeared in two journals:
Accounting Research (116) and Finance and Accounting (124). These 283 articles cover a
broad range of topics, including management control systems, cost accounting and man-
agement, externally oriented MA, decision-making techniques, and information technology
applications. We also found some significant differences in topic coverage between the two
subperiods 1997–2001 and 2002–2005.
7 Construct validity refers to whether a particular operational definition is indeed a valid measure of the construct
in question (Birnberg et al. 1990; Kerlinger and Lee 2000). For case study research, construct validity is con-
cerned with whether the issues or variables involved are specified, and whether the measures for the issues or
variables do indeed reflect the specific issues or variables under investigation. Triangulating with multiple sources
of evidence and creating a formal and presentable database are procedures for increasing construct validity (Yin
1994). For survey research, construct validity is concerned with the extent to which different measures of the
same construct converge and the extent to which measures of distinct constructs diverge (Cook and Campbell
1979; Kerlinger and Lee 2000). For field-archival research, researchers often rely on proxies if the variables of
interest cannot be directly measured; construct validity is expected to increase with the use of commonly
employed and / or widely validated measures. Internal validity is concerned with whether observed changes in
the dependent variables are indeed caused by changes in the independent variable(s) (Cook and Campbell 1979).
Internal validity does not apply to descriptive or exploratory studies (Yin 1994), and thus is assessed only for
the research that involves hypothesis testing and causal inferences. Pattern-matching is frequently used
for assessing internal validity of causal case study research (Yin 1994), and we examine whether such studies
in our sample have compared their observed patterns with ones predicted by theory. For survey research, we
focus on whether the authors have performed pre-testing, follow-up procedures, and nonresponse bias analysis
(Van der Stede et al. 2005). For field-archival research, we focus on whether the articles have used control
variables and whether there are omitted variables. External validity refers to the extent to which the obtained
result(s) can be generalized to other samples or settings (Campbell and Stanley 1966). Yin (1994) distinguishes
between statistical generalization and analytical generalization. The former concerns the ability to generalize the
findings obtained from one sample to other samples while in analytical generalization, researchers attempt to
generalize a set of results to some broader theory (Yin 1994). Yin (1994) suggests that while statistical gener-
alization applies to survey research, it does not apply to case study research. As such, for case study research,
we focus on whether the article under review explains why a case site is selected. For survey research and field-
archival research, we focus on sample description and response rate (in the case of survey research). Reliability
refers to the degree to which findings obtained by a researcher can be replicated by another researcher using
the same procedures. For case study research, we focus on whether the authors have used a case study protocol
or similar procedures. For survey research, we focus on reliability of measures for the variables of interest. For
field-archival research, we focus on the description of samples and databases.

An Overview and Assessment of Contemporary Management Accounting Research in China 133
Journal of Management Accounting Research, Special Issue 2008
We found that normative / conceptualpapers dominated the sample, followed in de-
scending order by case studies, surveys, field-archival studies, and analytical modeling
research. There was a significant association between the papers’ age and their research
methods. There also was a greater focus on specific industrial, as compared to generic,
settings in the 2002–2005 period. In terms of theoretical underpinnings, 226 (79.9 percent)
of the articles were totally based on the authors’ own reasoning, with no explicit or de-
tectable application of extant theories or reference to empirical evidence. Among the much
smaller number of articles that explicitly or implicitly invoked theories, finance and eco-
nomic theories are applied most frequently. Because theory is important for guiding research
design and interpreting the findings, it is encouraging that both the absolute number and
proportion of papers applying theories are substantially higher in the more recent (2002–
2005) period.
In the following four sections of this report, we summarize the contents of the papers
by research topics, research methods, research settings, and the application of theory. Crit-
ical comments on the research are integrated into the sections on research methods and
theory application. The sixth section of the paper compares the topics covered by this set
of articles and ones identified by Chinese business managers as being important, while
the seventh section examines some factors that may have shaped Chinese MA research. The
final section provides a summary and discusses potential directions for advancing MA
research in China.
DISTRIBUTION OF RESEARCH TOPICS
To avoid an overly fragmented discussion, we followed the general approach of Shields
(1997) and assigned the 283 articles among the following categories: management control
systems, cost accounting and management, decision-making methods, externally oriented
MA, MA in general, information technology applications, and a catchall ‘‘other’’ category.
Table 1 shows the specific topics placed in each category. For example, the topics subsumed
under the ‘‘management control systems’’ heading include standard costing, operating budg-
ets, performance measurement (e.g., economic value added [EVA]), transfer pricing, re-
sponsibility accounting, performance evaluation systems (e.g., balanced scorecard), and
performance-based compensation.8 Panel A of Table 1 shows that 133 (47.0 percent) of the
articles examine issues related to management control systems, 69 (24.4 percent) deal with
cost accounting and management, 19 (6.7 percent) pertain to externally oriented MA, seven
(2.5 percent) focus on decision-making methods, and two (0.7 percent) address information
technology (IT) applications. The remaining articles either discuss general issues in MA
(34 articles, 12.0 percent) or other MA-related topics (19 articles, 6.7 percent).
Management Control Systems
Among the topics under the management control systems rubric, performance mea-
surement (47 articles) and operating budgeting (44 articles) have received the most atten-
tion. More than 20 percent of the performance measurement articles focus on EVA. Some
of these elaborate on the development and components of EVA, and provide guidelines to
enhance the benefits from using this measurement approach. Others are spread across the
8 We acknowledge that some of the topics could reasonably be placed in different categories from those we have
selected. For example, CVP and standard costing could also be considered cost accounting and management
techniques. However, the general thrust of our findings is not sensitive to these reclassifications, in part due to
the small numbers of studies on these topics. Also, we provide enough detail in Table 1 for readers to apply
their own topic classifications.

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Journal of Management Accounting Research, Special Issue 2008
following three categories: (1) surveys on the potential benefits of EVA to firms, the pro-
cedures in calculating EVA including cost of equity capital, adjustments of generally ac-
cepted accounting principles (GAAP) numbers, and the difficulties of making such calcu-
lations; (2) calculations of EVA for listed companies and comparing the rankings with one
provided by Stern Stewart; and (3) comparing EVA and other financial measures on their
association with stock prices. There also are papers that review the development of per-
formance measurement and / or introduce and compare various performance measures (e.g.,
shareholder value added, cash value added, cash flow return on investment), and case studies
on how firms evaluate the performance of departments or subsidiaries. The State-Owned
Capital Performance Measurement System promoted by the central government is also
reviewed, and evaluated by the associations of measures in the system (e.g., return on
equity) with stock prices or returns. 9 Some papers provide suggestions for firms in selecting
performance measures. Pan (2002), for example, argues that different performance measures
should be used by firms with different characteristics, e.g., high-tech firms (share price
based) and traditional firms (net income based); growth firms (share price based) and mature
firms (net income based).
Most of the operating budgeting articles point out the pitfalls of, misunderstandings
about, or difficulties in budgeting practices, and offer guidelines for improvement. For
example, Zhao (2003) indicates that mistakes often observed in practice include preparing
budgets for their own sake without thinking of the purposes of budgeting; erroneously
thinking that budgeting is purely a financial exercise that involves only finance staff and
financial control; vulnerability to budgetary slack creation; and preparing budgets on an
incremental basis without analyzing the costs and revenues of activities along the value
chain. Wang (1999) argues that firms at different stages of development should have dif-
ferent foci in their budget management systems, e.g., capital budgeting for new firms, sales
budgeting for growth firms, cost control for mature firms, and cash flows for declining
firms. Yu et al. (2004) propose a budgeting system framework consisting of three modes:
production capacity oriented, sales oriented, and profit oriented. In turn, each mode contains
five elements: modules and their relations, relations with financial accounting, relations
with non-financial measures, relations with strategy, and relations with incentive systems.
Beyond these normative articles, there are reports on successful budgeting system imple-
mentations which include details on the contents and processes of budgeting, and how
budgeting systems relate to other systems such as responsibility accounting.
Even though responsibility accounting has long been used in China, it still attracted
the attention of 13 articles. Writings on this topic encompass (1) explaining the origin
and development of the internal economic responsibility system (IERS); (2) comparing
IERS to responsibility accounting systems in the West; (3) highlighting the problems
with implementing a responsibility accounting system; (4) describing the operation of in-
ternal banks in various firms such as oil and gas companies; and (5) case studies of the
internal contract system’s application in railroad construction projects and the iron and steel
9 Zhang (2001) makes the case that Chinese companies’ performance measurement practices are heavily influenced
by government mandates. First, the ‘‘Basic Financial Standards for Business Enterprises’’ of 1992 stipulated
ratios meant to support central government control (e.g., debt to assets, current ratio, quick ratio, stock turnover,
profit and tax over sales, and return on equity). In 1995 the Ministry of Finance issued the (trial) ‘‘Measurement
System for Enterprise Performance Evaluation,’’ which also specified measures to be computed (e.g., return on
sales, return on equity, capital maintenance and growth rate, debt to assets ratio). Finally, a new ‘‘State Owned
Capital Performance Measurement System’’ was introduced by four government ministries (Ministry of Finance,
State Economic and Trade Commission, Ministry of Personnel, and State Development and Planning Commis-
sion) in the 1995–1999 period. This system included 32 items such as return on equity, solvency, and growth
potential. More details about these developments are available in Chow et al. (2007).

An Overview and Assessment of Contemporary Management Accounting Research in China 135
Journal of Management Accounting Research, Special Issue 2008
manufacturing industries. Focusing on responsibility accounting practices in general, Liu
et al. (1998) argue that Western responsibility accounting is richer than that practiced in
China. In particular, they assert that the former starts from market or sales forecasts, while
the latter starts from targets passed down from superiors; the former is authoritative and
relates to compensation while the latter does not; the former involves the whole firm, its
components and their heads while the latter does not involve subunits and heads; and the
former emphasizes such value indicators as capital, cost, and profit whereas the latter
stresses production and physical indicators. Yang (1997) argues that China’s Internal Eco-
nomic Responsibility System (IERS) differs from the responsibility accounting systems of
the West. He traces the origins of IERS to the ‘‘Shift and Group Business Accounting
System’’ used in the 1950s and 1960s to make individual workers fulfill their own respon-
sibility. The system evolved in the subsequent decades into the IERS. While many forms
of IERS exist in practice, they share several features. First, all involve a contract-based
relationship between the enterprise, usually represented by its top managers, and its super-
visory state agency. Second, the managers face substantial risks and rewards because their
performance is linked to their enterprises’ performance. Third, there is an open selection
of enterprise managers. Finally, most systems have multiyear targets and incentives in order
to curb management myopia.
Articles on the internal bank hold that it is another unique feature of responsibility
accounting systems in China (e.g., Zhang 1997). This mechanism can be traced back to
1970 as a means for settling internal transactions, credit and funds-use control, and re-
sponsibility management. It was widely promoted by the State Economic Commission
(which later became the State Economic and Trade Commission) in 1979, and became
widespread in the late 1980s and early 1990s (Zhang 1993). Zhang (1997) maintains that
the internal bank must be integrated with other components of responsibility accounting
such as responsibility unit assignment, responsibility budgeting, control, and evaluation of
responsibility units. In contrast to these analyses at general levels, Miao (2000) focuses on
specific company practices and compares standard costing in Baogang (an iron and steel
company) with responsibility cost management in Angang (another iron and steel company).
All of the 11 articles on performance evaluation systems deal with the balanced score-
card (BSC). Most are concerned with explaining the concepts and contents of BSC and
why it is superior to the traditional performance evaluation system. These papers elaborate
on the four dimensions of performance measures as suggested by Kaplan and Norton (1992,
1996, 2001) and their linkages with firm strategy. The limitations of BSC also are indicated,
including the development and implementation costs, and the difficulty of setting targets
and weights for the performance measures. Several papers report on how BSC adoptions
in the banking and high-tech industries enhance competitive advantages. Integrating BSC
with other systems such as EVA, executive stock options, and enterprise resource planning
(ERP) also is discussed. It is pointed out, for example, that applying BSC in an ERP
environment can facilitate access to performance measurement data and help to assess
supply chain performance. Finally, the ten articles on performance-based compensation
either address the association between managerial incentive contracts and accounting choice
by reviewing and summarizing the Western agency theory literature, or replicate prior West-
ern studies by empirically examining the determinants of executive compensation including
firm performance, managerial control, managerial ownership, diversification, and firm risk.
Taken as a whole, this category of research introduces new management control systems
such as EVA and BSC, on the one hand. On the other hand, it explicitly points out the
unique features of management control systems in China by, for example, comparing re-
sponsibility accounting in China with that in the West. Although a majority of these articles

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do not involve, in theory, development or testing, a few use the archival field data to
investigate the relevance of various performance measures to stock price, and the deter-
minants of executive compensation.
Cost Accounting and Management
Almost half (31) of the 69 articles in this category pursue issues related to activity-
based costing / activity-based management (ABC / ABM). There also are 10 articles on target
costing and nine on environmental accounting; the remaining 19 articles address a range
of general issues in this area.
The ABC / ABM papers introduce and explain concepts such as value-added activities,
cost drivers, resource drivers, activity drivers, and the procedures for calculating ABC
product costs. Symptoms of obsolete cost systems also are mentioned. Differences between
‘‘traditional’’ cost systems and ABC are discussed via numerical examples, some of which
are based on field data. There also are case studies of ABC adoption by firms in the
petroleum, electrical devices, iron and steel, and railroad industries. Some papers suggest
conditions conducive to ABC/ABM adoption, including adequacy of information systems
and quality of the accounting personnel. Other papers propose integrating ABC/ ABM with
other MA practices like the budgeting system (activity-based budgeting), variance analysis,
standard costing, responsibility accounting, Pareto analysis, cause and effect analysis, and
value chain analysis. Capacity management via ABC also is suggested by differentiating
among idle, non-productive, and productive capacity. It is even proposed that cost of capital
be included in ABC product costs for conducting product profitability analysis. In contrast,
one paper argues that process flows, activity consumption, activity driver rates, and market
situations are changing over time and thus, static models of product costing are not appro-
priate (Zhang and Wei 2000). This paper, however, does not back up its assertions with
any explicit analytical model. Another paper proposes a workshop activity optimization
model using ABC, and uses data from an actual company to solve the optimization problem
(Zhang et al. 2002).
The relatively high level of attention to target costing (10 articles) may be due to its
perceived similarity to the highly touted Hangang experience. Hangang is the abbreviated
English name of Handan Iron and Steel Co. Its cost management practice is often compared
to target costing and considered a major factor for the company’s economic success. Re-
search on the Hangang experience highlights the implementation and distinctive features
of this practice. In particular, the company introduced a system of ‘‘market simulation-
based accounting and cost negation’’ in 1991. Under this system, Hangang set internal
transfer prices among branch factories by taking the average market prices of half-finished
goods and adjusting these for market changes semi-annually or annually. The transfer prices
were included in calculating each factory’s manufacturing costs and gross profit, and ad-
ministrative expenses and financial expenses were deducted from the latter to arrive at the
profit figure. If a factory’s manufacturing cost was lower than the target set by the company,
then there would be a reward. Otherwise, no reward would be forthcoming (this approach
to determining rewards is what constitutes the ‘‘cost negation’’ method).
A number of papers are concerned with whether the Hangang system is or is not target
costing. Wang (1998) argues that it is, while Sun and Cao (2000) argue that it is not because
target costing has an ex ante focus, whereas the Hangang system is ex post because of cost
negation. Sun and Cao (2000) further emphasize that target costing focuses on new product
planning, and extends cost management beyond the firm to include supply chain partners.
Thus, even in the case of an exemplary Chinese business enterprise, MA practices still

An Overview and Assessment of Contemporary Management Accounting Research in China 137
Journal of Management Accounting Research, Special Issue 2008
seem to lag cutting-edge developments, though Xu (2002) reports that Hangang’s cost
management system has evolved to place an increasing emphasis on ex ante cost design.
Of the articles that do not mention the Hangang experience, several explain the concepts
and implementation of target costing in the product planning and design stage. Others
suggest using ABC to assist in cost estimation, and several suggest the possibility of em-
ploying value engineering. The articles related to environmental accounting call for its
inclusion within the scope of MA. Methods of calculating internal and external environ-
mental costs are proposed, and their allocation to products is suggested to reflect the ‘‘true’’
costs and to calculate ‘‘green bottom lines.’’ The remaining cost accounting and manage-
ment articles discuss issues in this area, but either do not specify a particular MA technique,
or mention several techniques at once. Some call for changes in cost management (e.g.,
adoption of daily cost reporting and the total cost management notion) in response to
changes in the manufacturing and market environments and management theories. Others
offer cost management suggestions to firms in the distribution and real estate industries.
There also are case studies from the petroleum and iron and steel industries. One paper
reports the results of a survey on cost management methods in use. Proposals also are
offered for defining the scope of ‘‘modern’’ cost management and the concept of cost.
Zhang (2004), for example, suggests establishing standards to define costs, and stipulating
the procedures for cost calculation and allocation.
Decision-Making Methods
Articles under this heading encompass capital budgeting (four articles) and CVP anal-
ysis (three articles). Relating to the former, a paper argues that risk analysis should be
explicitly incorporated into capital budgeting, and demonstrates Monte Carlo simulation
with a case study. Another paper suggests using EVA as a criterion for assessing the per-
formance of information technology investments. The other papers either emphasize the
distinction between making capital budget decisions and their administration, or call for
attention to strategic and organizational aspects of capital budgeting. The articles on CVP
include a case study in the petroleum industry and an explanation of a break-even period
measure (the length of time required to achieve a pre-specified level of profit).
Externally Oriented Management Accounting
Two lines of research fall into this category: value chain analysis (ten articles) and
strategic MA (nine articles). Some papers on value chain analysis elaborate on the ‘‘value
chain accounting management’’ system proposed by a Chinese scholar named Dawu Yan.
In 1983, Yan had suggested that ‘‘it is feasible to abstract the content of accounting man-
agement into value activities,’’ and that ‘‘accounting management should be part of the
value management system’’ (Yan and Yin 2003a, 200b). Yu and Zhang (2005) assert that
the approach suggested by Yan changes the scope and content of MA by integrating value
chain analysis and MA and as such, is a contribution to accounting theory in the world.
Chi and Yang (2005) position value chain accounting management as a tool as well as an
essential part of value chain management. Yang (2005) proposes changes to information
systems to facilitate management and control over the allied enterprises in the value chain.
Other papers offer guidelines for value chain analysis, integrate value chain analysis with
ABC to manage costs along the value chain, or review the evolution of thoughts about
‘‘value,’’ including the concept of a value chain. Finally, a paper extends value chain man-
agement to the virtual value chain and proposes the concept of a cyber value flow.

138 Duh, Xiao, and Chow
Journal of Management Accounting Research, Special Issue 2008
The articles on strategic MA explain its concept and content, as well as its relationship
with strategic management. Features of strategic MA, such as its being outward looking,
integrated, dynamic, and long-term oriented are mentioned, and implications for man-
agement accountants are offered. There also are case studies. One of these focuses on
Hangang’s implementation of strategic cost analysis, including value chain analysis, stra-
tegic position analysis, and cost driver analysis; another reports on an electric appliance
company’s experience with using strategic cost analysis to manage marketing costs.
Management Accounting in General
A majority of studies (21 articles) in this category broadly discuss: (1) the historical
development of MA practices in China; (2) current MA practices, their weaknesses, and
suggestions for improvement; (3) the outlook and trends of MA practices; (4) the decision
support role of MA; (5) the nature of MA (humanistic versus mechanistic); and (6) the past
and outlook of MA research. Four articles provide overviews of MA practices in Japan and
other Asian countries, address the impact of a transitional economy on MA, or discuss the
melding of management and financial accounting. Nine articles survey MA practices among
Chinese firms. 10
Information Technology Applications
Of the two papers in this category, one demonstrates how to use Excel 䉸 to estimate
cost behavior and to prepare budgets. The other argues that conglomerate enterprises should
establish systems to share information internally among subsidiaries and operating units;
internal management reports can thus be produced for budgetary control, fund management,
and strategy formulation.
Other
Articles placed in the ‘‘other’’ category cover topics in education (four articles), risk
management (two articles), supply chain issues (three articles), value-based management
(eight articles), human resource accounting (one article), and certified management ac-
countants (one article).
Comparing the Mix of Topics between 1997–2001 and 2002–2005
Panel B of Table 1 shows the distribution of articles across topic areas in the period
1997–2001 versus 2002–2005. These distributions are significantly different (Chi-square
⫽ 23.31, df ⫽ 3, p ⬍ 0.001).11 The primary difference is that there are more articles on
target costing and responsibility accounting in the period 1997–2001, while the later period
has more articles on operating budgeting, performance measurement, performance evalua-
tion systems, value chain analysis, and value-based management.
DISTRIBUTION OF RESEARCH METHODS
Panel A of Table 2 shows that normative / conceptual papers dominate the sample (203,
or 71.8 percent), followed in descending order by case studies (47, 16.6 percent), surveys
10 One might expect that these surveys would add to our store of knowledge about Chinese MA practices, beyond
what is available from the English language reports. However, as will be discussed further below, various
methodological shortcomings leave open the reliability of these studies’ findings.
11 Because of small cell sizes for decision-making techniques and IT applications, we placed them in the ‘‘other’’
category for this analysis, resulting in four topic categories: management control systems, cost accounting and
management, MA in general, and other.

Journal of Management Accounting Research, Special Issue 2008
TABLE 1
Distribution of Research Topics
Panel A: Year-by-Year Comparisons
Number of Articles 1997 1998 1999 2000 2001 2002 2003
1 Management
Control Systems
1.1 Standard costing 1 0 2 1 0 0 0
1.2 Operating
budgets
0 0 1 2 5 5 3
1.3 Performance
measurement
(e.g., EVA)
0 2 5 4 3 3 13
1.4 Transfer pricing 0 0 0 0 2 0 1
1.5 Responsibility
accounting
5 2 2 1 1 0 2
1.6 Performance
evaluation
systems
0 0 0 0 1 4 2
1.7 Performance-
based
compensation
(BSC)
0 0 0 1 1 1 3
Subtotal 6 (30.0) 4 (21.0) 10 (37.1) 9 (34.6) 13 (46.4) 13 (50.0) 24 (82.8)
2 Cost Accounting
and Management
2.1 ABC/ABM 4 3 1 3 3 5 1
2.2 Target costing 2 2 1 3 1 1 0
2.3 Environmental
accounting
0 1 1 1 1 1 1
2.4 Cost accounting
and
management in
general
1 3 1 3 1 0 0
Subtotal 7 (35.0) 9 (47.4) 4 (14.8) 10 (38.5) 6 (21.4) 7 (27.0) 2 (6.9)

Journal of Management Accounting Research, Special Issue 2008
TABLE 1 (continued)
Number of Articles 1997 1998 1999 2000 2001 2002 2003
3 Decision-Making
Methods
3.1 Capital
budgeting
0 0 0 0 1 1 1
3.2 Cost-volume-
profit analysis
0 1 0 0 1 0 0
Subtotal 0 (0.0) 1 (5.3) 0 (0.0) 0 (0.0) 2 (7.2) 1 (3.8) 1 (3.5)
4 Management
Accounting in
General
4.1 General issues 3 2 7 2 4 1 0
4.2 Surveys of
practice
3 1 1 1 1 1 1
Subtotal 6 (30.0) 3 (15.8) 8(29.6) 3 (11.5) 5 (17.9) 2 (7.7) 1 (3.4)
5 Externally
Oriented
Management
Accounting
5.1 Value chain
analysis
0 0 1 1 0 0 0
5.2 Strategic
management
accounting
0 0 3 1 2 1 0
Subtotal 0 (0.0) 0 (0.0) 4 (14.8) 2 (7.7) 2 (7.1) 1 (3.8) 0 (0.0)
6 Information
Technology
Applications
0 (0.0) 0 (0.0) 0 (0.0) 0 (0.0) 0 (0.0) 0 (0.0) 0 (0.0)