**5. Discussion**

Providing the results of an exploratory study of how accounting can be used to facilitate strategic change, this paper responds to the calls from many authors and organizations regarding the challenges and opportunities of application of management accounting practices in the times of economic downturn. The findings obtained in this paper are generally comparable to those of specialists at the international level. Thus, CIMA [86] shows the increasingly widespread use of management accounting technologies such as rolling forecasts, strategic management accounting, total quality management, balanced scorecard, a model of economic value added, among others. Based on the results of the evaluation of various tools, the most widely used costing tool (production accounting tool) is overhead allocation, as well as variance analysis; they are actively used in the foreign practice of standard costing and full (absorption) costing [86].

Our analysis, however, has revealed that during 2010–2018, the organizations of all sizes, sectors, and types of territories responded to the deterioration of economic situation by changing the management accounting practices. This supports the findings of many studies related to crisis–accounting relationship, particularly, Bangara's [87] view that increase in the volatility of internal and external environments surrounding an organization has an impact on the adoption of management accounting practices, Endenich's [88] assertion that economic crisis represents a crucial driver of management accounting change, Van der Stede's [67] and Edogbanya's [89] appraisal of the

impact of economic recession on control mechanisms and their role in the correction of the effects of economic decline in corporate performance, and Simons' [90] finding that the transformation of strategic priorities in the times of economic uncertainties influences the manner in which accounting controls are used.

Senior and Swailes [91] identified the external environment as the second most important aspect of an organization's environment that might cause change (temporal and internal environment being the first and the third, respectively). In the case of the economic decline in Russia, however, the primacy of external environment in transforming accounting practices has been revealed. It supports the concept of the prevalence of external pressures as the causes of change within organizations in the conditions of crisis discussed by Carruthers [92], Greenwood et al. [93], and Tracey et al. [94]. Busco et al. [95] and Moll and Hoque [96] also reported that changes in the application of MA tools occurred as a response to external sources, such as market pressures and consumer expectations.

In correlation with Siska [97] and Abo-Alazm Mohamed [98] who performed their studies in the cases of the Czech Republic and Egypt, respectively, the analysis demonstrated that in the pre-recession period, Russian organizations predominantly used strategy techniques, such as strategic management, budgeting tools, and decision support systems. Higgins and Coffey [99] also showed that, in the times of economic growth, the companies used SR strategically, while sustainability was embedded into their strategic priorities. In the conditions of economic slowdown, Russian organization have switched to short-term tools which have a direct effect on performance parameters. Limited forward-looking as a reaction to increasing external volatility along with quantitative disclosure of operations to achieve sustainability outcomes have been also disclosed by Stacchezzini et al. [6]. Our study demonstrates that the economic decline in Russia in 2014–2018 increased the importance and usage of short-term planning and the development of yearly budgets for cost controlling, performance evaluation, and planning day-to-day operations. In support of the findings of Stacchezzini et al [6], we found that the majority of respondents did not adhere to long-term solutions amid the volatile external environment, abandoned development of long-term action plans and forecasting, and avoided providing information about their sustainability performance, especially when their economic results were poor. This finding conflicts with the results of the surveys conducted by Bennett et al. [7]. They allowed envisaging the increasing use of sustainability information for planning in daily operations among the number of leading companies in Germany and the UK. In those countries, the tendency towards decision situations which require short-term information can be explained in terms of their implications for conventional management accounting. In Russia, many of SMA and SR measures are still new and therefore are not considered to be applicable in short-term decision making. Pavlatos and Kostakis [5] surveyed the organization in post-crisis Greece and ranked strategy, budgeting techniques, and strategic management accounting tools as the highest in importance. As contrasted to our study, their results demonstrated that during the crisis, strategic and planning tools were used more extensively by companies as compared to the period before the crisis [5]. At the same time, on the contrary, the results of our study support the earlier findings of Pavlatos and Kostakis [5] as they revealed a focus on strategy-oriented practices among Greek companies during the pre-recession period, similar to that identified in Russia.

The lags in changing MA practices from those strategically oriented to short-term ones are supposed to be one of the factors of endogeneity in this study. Li [76] suggested lagged dependent variable as one of the methods to reflect observable and unobservable past information of a firm and in such a way to explain its future performance. Each of the three scenarios of pre-recession, current, and future use of MA instruments considered in our study have an endogeneity problem not only because of the endogenous choice of MA tools for the survey but also because of the reverse causality from economic performance to external volatilities. It is supposed that both past performance and current MA practices may have a positive impact on sustainability. The performance expectations are not reflected, particularly, in the variations in MA responses between the firms that foresee better or worse performance under the influence of economic recession. In terms of the lagged managerial

decisions, the endogeneity problem has been also discussed by Gatchev et al. [100] in the case of financial decisions and Bae et al. [101] and Lemmon et al. [102] in the case of lagged and future leverages. Abdallah et al. [78] suggest that the endogeneity problem may be mitigated by the utilization of system generalized method of moments in the form of lagged differences in organizational behavior. This method may apply to the scenarios we depicted as it relies on a sufficiently long time series and allows for the inclusion of time-invariant binary variables.

Another dimension of the endogeneity problem in this study is that the goals of management accounting in Russia do not necessarily correspond to global trends in accounting. According to the estimations of the respondents, management accounting has received a predominantly fragmentary distribution in Russia (53.8% of respondents confirmed the off-system use of its single instruments), which does not indicate the full functioning of the management accounting system. Some practices, rather commonly used internationally, such as shareholder value analysis and product lifecycle analysis, have gained in importance and usage in Russia neither in the pre-crisis period nor during the crisis. Abdel-Kader and Luther [103] and Chenhall and Langfield-Smith [104] also reported rare use of such tools, but only for pre-crisis periods. The endogeneity increases in the times of economic decline when the managers have to act quickly and choose strategies and tools of accounting without proper investigation of their effects with the expectation that they will ensure better performance and improve sustainability of a firm. This effect, previously studied by Hamilton and Nickerson [105], is evident among the Russian companies in 2014–2018. This may be explained by the fact that the existence of new MA practices is not widely known about and practiced among the accountants' community in Russia. On the contrary, some tools are widely and even increasingly (in the times of a crisis) used in Russia despite their discontinued use in international practice. For example, CIMA [86] recognized payback as an unsuitable mean of investment appraisal, yet its popularity in Russia has been increasing since 2014 despite the availability of other simple alternatives which provide more informative results.

A significant difference is observed in the target of accounting (in Russian practice, conservative views on the purpose of management accounting prevail). As the economy declined in 2014–2018, the main goal for the majority of the organizations was to minimize costs (17%) and control the performance of the organization in short and medium run (13%). This tendency is particularly observed in underperforming territories among small and medium enterprises in service, tourism, and trade sectors. Budgeting is an area where, for example, CIMA [86] suggested that traditional practices had become outdated and thus predicted the emergence of the tendency for budgets to trigger game-playing, budget-padding, and other sub-optimal behavior. Our study, however, demonstrates that, in the conditions of economic uncertainties, businesses avoid a radical re-invention of budgeting and performance management and continue using rolling forecasts, cash forecasts, and financial year forecasts. It is consistent with the results of Pavlatos and Kostakis [5] who demonstrated that those budgeting tools which allowed tighter control, such as budgeting for controlling costs, gained in importance and use during the crisis, and the findings of Hyvonen [106] who considered budgeting techniques as important and widely used by management in cost controlling and planning in the times of progressing economic decline. Dekan [1] also concluded that in the times of economic recession, the companies tended to reduce spending in any discretionary areas to lessen existing cash-flow needs, as well as handled indirect cost during falling production.

Most of the respondents outlined that the current economic situation in Russia might cause additional risk factors that had not existed or did not have a strong influence on the companies in the pre-crisis period. As the economy declines, new emerging threats to sustainable development may include constraints on the availability of capital and credit, concern and liquidity issues, degrading purchasing power of population, high inflation, and volatile markets, which taken together result in significant uncertainty of doing business. Coles et al. [77] examined two measures of risk, which were stock return volatility and cash from volatility, and found that, through financial policy, increasing risk could generate uncertain performance. The idea was supported by Goel and Thakor [107], who provided a model that addressed the relationship between risk-taking, competition, and tournament incentives, Kini and Williams [108], who revealed the link between risk and internal tournament incentives, and Chen et al. [109], who applied the risk-performance link to competition. The survey demonstrates, that, in the future, the respondents see the greatest increase in demand in risk management, variance and breakeven analysis, and activity-based management. This means that the expectation of continuing economic decline directs the businesses to turn into contemporary MA techniques, as opposed to traditional cost accounting systems. This finding agrees with those from the studies of Scorte et al. [110] and Angelakis et al. [111] who both report an increasing trend for organizations to risk and place greater emphasis on currently developed techniques instead of traditional performance evaluation techniques. According to Coles et al. [77], in determining firm risk, managers face potential costs of reduced expected utility arising from exposure to risk through performance-contingent compensation. Kale et al. [112] suggested that in order to increase the probability of success, the firms set a higher internal promotion-based tournament prize. A convexity in executive compensation can offset the risk exposure and possibly increase the incentive to take risk in changing MA practices among the managers [113,114]. In a volatile environment, a less risk-averse manager inspired by higher competition and tournament incentives will take more risks and potentially earn more through increased option value, which leads to higher performance of a firm but threatens sustainability. In case of Russia, we see that this suggestion complies with a hypothesis of Coles et al. [77] that the usage of financial and accounting policies that increase firm risk will, in turn, distort sustainability, decrease investment in hard assets, and increase the industry gap. Peer groups as substantiated by Bizjak et al. [115], and Faulkender and Yang [116,117] may be used in setting compensation levels for the specialists responsible for management accounting.

In many prior studies, firm size has been employed as an important firm characteristic. Size effect, the relevance of firm size in determining the dependent variables, has been observed by Dang et al. [89], Baker and Hall [118], Coles et al. [119], and Frank and Goyal [120], among others. Vijh and Yang [121] found that the sign and significance of firm performance variables were sensitive to different firm size measures. Our study demonstrated that in Russia, the intention to increase the use of risk management and performance-oriented accounting tools did not diverge across the sectors or firm sizes. We found, however, that small and medium enterprises, in the main, implemented a narrower set of MA tools compared to large companies. Primarily, SMEs used simple MA instruments, such as pricing, and thus were not able to diversify them. Since most of the MA tools are generally rather resource intensive, in the times of economic decline, Russian SMEs have been decreasing using budgeting tools and instead stressing on personal control of resources and expenditures. Similar to our finding, Fiala and Hedija [122] did not detect a clear dependence of performance management and accounting practices on firm size, but Lotti et al. [123] expected that such a link might become valid in the long run, when the economic volatility decreased and markets tend to approach a steady state.

#### **6. Conclusions**

In a global context, the emerging volatility of the markets along with the evolution of the regulatory framework have changed the determinants of corporate performance. In this increasingly volatile business context, sustainability management has generated demands for the adaptations of conventional management accounting to serve the resilience-related goals. Prior to and in the times of economic decline, accounting policies of a company are essential for its sustainable performance. In a down economy, the importance of management accounting increases as its major goal is to generate the necessary information about external environment, relaying it to changing the internal one. The primary focus of this paper was to examine whether the change in the business environment, particularly, economic recession, affects the level and set of management accounting tools. Given the relative novelty of sustainability as one of the goals of management accounting in Russia, it was not surprising to find a high level of variety in MA practices among Russian companies. The survey demonstrated that they used a number of tools across a range of operational, managerial, and strategic functions. Although several MA instruments were in use across the sample of surveyed companies,

the range of different methods within each company was usually limited. Both the importance and popularity of particular MA tools varied depending on the external economic factors.

The contribution of this study to the literature involves the understanding of the use of particular MA tools before and during the economic recession. Comparisons were made between management accounting practices used by the organizations differentiated by their size (micro, small, medium, and large), sector (service, industry, trade, agriculture, and tourism), and location (territories of Russia differentiated on the level of their economic performance). Out of 54 management accounting tools, the most popular ones were identified across ten categories (cost, price, budget, profitability, investment, performance measurement, performance management, rewards, performance reporting, and strategic techniques) and three pillars (operation, management, and strategy). The major finding is that both importance and usage of proactive strategy-oriented tools decreased during the crisis, while at the same time the level of importance and usage of less-sophisticated short-term instruments increased as the organization focused on achieving immediate and direct effects on sales, profits, and other performance parameters. The forecast of future application of management accounting tools in the situation of progressing economic decline revealed that organizations of all types and sectors planned to increase the use of such practices as risk management variance analysis, rolling forecasts, payback, breakeven analysis, and activity-based management in response to deteriorating economic conditions.

The survey approach used in this study imposes particular limitations, as well as emerges some directions for future research. Specifically, the contribution to the knowledge about MA–crisis–sustainability relations cannot be achieved through interviews alone. In the volatile environment, it is necessary to study the change within the firms in adopting a SR framework and integrating sustainability issues into short-term planning and operative decision making. The interviews allow the observation of a correlation between economic volatility and MA change but did not contribute to the understanding of what actually drives the change towards improved sustainability performance. The endogeneity problem exists as the study observed a correlation between the external environment and the change in use of MA tools in all three scenarios, but does not explain causality. The role of particular MA tools in facilitating organizational changes in response to the economic crisis has remained underexplored. Further research should, therefore, focus on possible mitigation of endogeneity by using a combination of methods, including lagged independent and control variables (suggested by Li [76]) and system generalized method of moments (transformed by Abdallah et al. [78]). This will allow assessing organizational transformations induced by management accounting and the relative effectiveness of certain accounting practices in responding to external economic fluctuations.

The impacts of ownership, size, and sector on the attitudes of a company to sustainability-oriented use of MA tools might be explored further. The survey format of the study has not allowed us to collect relevant commercially sensitive information on all possible firm size measures in the case of Russian organizations. We, therefore, utilized the open information on the number of employees as a proxy, but the researchers can use some alternative firm size measures such as total assets, total sales, market value of equity, enterprise value, total profits, or net assets. All those proxies can be mechanically correlated with the dependent variables of performance and sustainability, therefore, the empirical sensitivity should be considered.

Due to the fact that this study included the companies from five sectors only, there is an opportunity to extend the research to a wider pool of industries, specifically, to banking (to study the changes in application of MA tools in banks and financial organizations in turbulent financial markets), oil and gas (to see if export-oriented resource companies ever react ro the deterioration of the economic situation in the domestic market), and retail (to investigate the MA-related reactions of retailers on degrading purchasing power of population during an economic crisis). It is also worth studying the recession-induced effects of tournament incentives on performance, risks, and sustainable development, specifically, in banks and financial firms, for which Coles et al. [77] earlier reported a statistically significant positive effect of industry tournament incentives on the volatility of cash flows and stock returns. Within the sectors, the selection of incentives and setting of compensation levels for the

managers should be studied based on the peer groups method in the light of relative peer effects, as suggested by Bizjak et al. [115,124] and Faulkender and Yang [116,117]. Understanding how peer groups are established for the purposes of relative performance evaluation is important to understanding the incentives for accounting managers and specialists for changing MA practices in volatile economic environment.

Since the data were collected in Russia, the results of the study may be generalized for the specific pre-crisis and crisis periods in this country only. The study should, therefore, be extended to other countries which either have recently experienced an economic recession (Greece, Portugal, Ireland) or currently have an economic situation similar to that in Russia (Kazakhstan, Ukraine, Argentina, Brazil). Such extension will allow cross-country comparisons. Replicating the study in other sectors apart from service, industry, and trade (finance and banking, retail, or information technologies) could allow extending the research and uncovering cross-sectoral variables which may further enhance the understanding of the role of management accounting in ensuring sustainable development in the times of economic decline.

**Author Contributions:** V.E. assembled the paper, wrote the initial version of the manuscript, and made the revisions; D.E. designed the research framework; A.B. performed the data collection; N.K. and A.I. analyzed the data.

**Funding:** This research and the APC were funded by the Fundamental Research Funds for the Central Universities, China, grant numbers HEUCFJ170901, HEUCFP201829, HEUCFW170905, 3072019CFG0901, 3072019CFP0902.

**Conflicts of Interest:** The authors declare no conflict of interest.
