Conceptual Explanation of Target Costing Based on Critical Perspective

The aim of this research is to advance the theory belonging to the determinants of adoption of target costing (TC) system by firms. Although the previous studies describes several factors, it clarifies the instances under which TC adoption will add firm value, which refers to b . T M S w’ 1978 evaluate the cost orientation of TC adoption, which responds the question as to why firms do not adopt TC even when the previous studies emphasize to the benefits of adoption. The paper concludes that possess of prospector managers the scope to take advantage of the high information asymmetry to inhibit TC adoption, because their stock-based compensation increases with volatility in earnings and stock returns. In contrast, managers with defending strategy obtain extensive cash-based compensation with the adoption of TC, which helps achieve much firm profits. The paper concludes with specific sources of agency problems and some avenues for future research. In the other words, adoption of a defensive strategy by managers in companies leads to value creation a long with the interests of all stakeholders intra and inter organization.