The Impact of the Management Control Systems Package on Organizational Performance: Evidence from the Banking Sector of Bangladesh

Abstract

The purpose of the study is to observe the effect of Integrated Management Control Systems (MCS) packages on organizational performance of banking sector in Bangladesh, where entrepreneurial competency is considered mediator and business strategy is considered moderator.

Design/methodology/approach: A mixed-method convergent design was employed, combining a quantitative cross-sectional survey (85-item questionnaire, N=40 mid-to-senior bank managers) with 20 semi-structured interviews of senior banking and Bangladesh Bank executives. Hypothesis testing involved using Partial Least Squares Structural Equation Modeling (PLS-SEM) while qualitative data was analyzed by using thematic analysis with NVivo.

Findings: The 68% explanation of variance in entrepreneurial competency and the 61% in organizational performance from the MCS package. The most important drivers score the highest beta values, which are 0.41 for Cybernetic Control and 0.35 for Planning Control. The relationship between MCS and performance is mediated completely by entrepreneurial competency, and entrepreneurial competency accounts for 63-67% of the overall indirect effects. Differentiation strategy has a particularly strong effect on the relationship between competency and performance (β=0.25) with no significant moderation. Private commercial banks have outperformed state-owned banks by 0.80 points, as a result of their better cybernetic, planning, and reward controls.

Originality/value: This is one of the very first studies to validate the MCS-as-a-package framework within the banking context in Bangladesh and has extended the emerging-market MCS theory by simultaneously examining both mediation and moderation. It shows that the key performance factor in a financial environment is entrepreneurial competency and not compliance with regulations.