Managing Exchange Rate Volatility Through Strategic Management Accounting: Implications for Competitive Advantage

This study examines the association between exchange rate volatility, the use of externally-oriented and strategically-focused management accounting practices (i.e., Strategic Management Accounting, SMA), and competitive advantage among listed manufacturing firms in an emerging economy. Drawing on contingency theory and the resource-based view (RBV), the study investigates whether exchange rate volatility influences SMA usage and whether SMA usage enhances firms’ competitive advantage under volatile foreign exchange conditions. Panel regression techniques with firm and year fixed effects were employed using data obtained from the annual reports of 56 listed manufacturing firms over the period 2015–2024. The findings reveal a positive and statistically significant association between exchange rate volatility and SMA usage, including both customer accounting and competitor accounting practices, suggesting that firms intensify externally oriented strategic accounting activities in response to foreign exchange uncertainty. The study further finds that SMA usage intensity positively moderates the relationship between exchange rate volatility and competitive advantage, as firms with more intensive SMA usage exhibit stronger relative competitive advantage in return on assets and market valuation under volatile exchange rate conditions. The findings support contingency theory by demonstrating that firms adapt their management accounting systems to environmental uncertainty, while the resource-based view explains how SMA functions as a strategic organisational capability that enhances competitive resilience. Robustness tests using entropy balancing, Driscoll–Kraay estimations, and alternative measures of exchange rate volatility confirm the stability and reliability of the results. Overall, the study contributes to the strategic management accounting (SMA) and international business literature by providing evidence that exchange rate volatility is associated with greater SMA usage and that more intensive SMA usage is, in turn, associated with stronger competitive resilience under conditions of economic uncertainty. The study also provides important practical implications for managers and policymakers in contexts where persistent exchange rate instability continues to shape business performance and strategic decision-making.