scholarly journals Association of Nonfinancial Performance Measures with the Financial Performance of a Lodging Chain

2005 ◽  
Vol 46 (4) ◽  
pp. 394-412 ◽  
Author(s):  
Rajiv D. Banker ◽  
Gordon Potter ◽  
Dhinu Srinivasan
Keyword(s):  
Financial Performance ◽  
Performance Measures ◽  
Nonfinancial Performance ◽  
Nonfinancial Performance Measures

The Effect of Positive and Negative Financial and Nonfinancial Performance Measures on Analysts' Recommendations

2012 ◽  
Vol 24 (2) ◽  
pp. 47-64 ◽  
Author(s):  
Dipankar Ghosh ◽  
Anne Wu
Keyword(s):  
Financial Performance ◽  
Performance Measures ◽  
Differential Effect ◽  
Financial Analysts ◽  
Data Availability ◽  
Financial Measures ◽  
Nonfinancial Measures ◽  
Nonfinancial Performance ◽  
Nonfinancial Performance Measures ◽  
Number Of Firms

ABSTRACT This research experimentally examines the favorable/unfavorable outcomes of a firm's financial and nonfinancial performance measures on financial analysts' recommendation to divest or invest in a firm. The participants were financial analysts who made recommendations ranging from “definitely sell” to “hold” to “definitely buy.” The results show that financial and nonfinancial performance measures and their favorableness have an interactive impact on analysts' recommendations. To be precise, the recommendations were very close to the “definitely sell” anchor when the performance was unfavorable, irrespective of whether the measures presented were financial or nonfinancial. Further, favorableness of performance on nonfinancial measures appears to be irrelevant when performance on financial measures is unfavorable. However, when performance on financial measures is favorable, the effect of nonfinancial performance had a differential effect on analysts' recommendations depending on whether these measures indicated favorable or unfavorable performance. Specifically, when nonfinancial performance was unfavorable, the recommendations were closer to “hold” on average, but the recommendations were closer to “definitely buy” on average when nonfinancial performance was favorable. These results are consistent with our expectations. Overall, given that more and more firms are disclosing nonfinancial measures along with the traditional financial measures, and with an increasing number of firms reporting unfavorable financial performance, the results of this research underline the importance of considering both financial and nonfinancial measures and their outcomes—favorable and unfavorable—on analysts' recommendations. Data Availability: Please contact the authors.

An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures

2000 ◽  
Vol 75 (1) ◽  
pp. 65-92 ◽  
Author(s):  
Rajiv D. Banker ◽  
Gordon Potter ◽  
Dhinu Srinivasan
Keyword(s):  
Customer Satisfaction ◽  
Financial Performance ◽  
Empirical Evidence ◽  
Performance Measures ◽  
Financial Measures ◽  
Nonfinancial Measures ◽  
Nonfinancial Performance ◽  
Incentive Plan ◽  
Nonfinancial Performance Measures

Recent studies report an increasing use of nonfinancial measures such as product quality, customer satisfaction, and market share in performance measurement and compensation systems. A growing literature suggests that because current nonfinancial measures are better predictors of long-term financial performance than current financial measures, they help refocus managers on the long-term aspects of their actions. However, little empirical evidence is available on the relation between nonfinancial measures and financial performance, and even less is known about performance impacts of incorporating nonfinancial measures in incentive contracts. Using time-series data for 72 months from 18 hotels managed by a hospitality firm, this study provides empirical evidence on the behavior of nonfinancial measures and their impact on firm performance. The results indicate that nonfinancial measures of customer satisfaction are significantly associated with future financial performance and contain additional information not reflected in the past financial measures. Furthermore, both nonfinancial and financial performance improve following the implementation of an incentive plan that includes nonfinancial performance measures.

Recommendations on Disclosure of Nonfinancial Performance Measures

2002 ◽  
Vol 16 (4) ◽  
pp. 353-362 ◽  
Author(s):  
Laureen A. Maines ◽  
Eli Bartov ◽  
Patricia M. Fairfield ◽  
D. Eric Hirst ◽  
Teresa E. Iannaconi ◽  
...  
Keyword(s):  
Performance Measures ◽  
Nonfinancial Performance ◽  
Nonfinancial Performance Measures

Performance Measure Properties and Delegation

2006 ◽  
Vol 81 (4) ◽  
pp. 897-924 ◽  
Author(s):  
Frank Moers
Keyword(s):  
Decision Making ◽  
Financial Performance ◽  
Performance Measures ◽  
Organizational Design ◽  
Performance Measure ◽  
Decision Making Process ◽  
Nonfinancial Performance ◽  
Incentive Problem ◽  
Financial Performance Measures

In this paper, I extend the organizational design literature by examining how the delegation choice is affected by the ability to resolve the incentive problem caused by this delegation. Based on the seminal papers by Grossman and Hart (1986) and Holmstrom and Milgrom (1994), I argue that the ability to resolve the incentive problem depends on the contractibility of financial performance measures versus nonfinancial performance measures, where the contractibility depends on the performance measure properties sensitivity, precision, and verifiability. The empirical results show that, if financial performance measures are “good” (“poor”) incentive measures, i.e., high (low) on sensitivity, precision, and verifiability, then using these measures for incentive purposes increases (decreases) delegation. Overall, the results are consistent with the argument that firms design their decision-making process around the quality of contractible performance measures.

An Empirical Investigation of the Performance Consequences of Nonfinancial Measures

2003 ◽  
Vol 15 (1) ◽  
pp. 193-223 ◽  
Author(s):  
Amal A. Said ◽  
Hassan R. HassabElnaby ◽  
Benson Wier
Keyword(s):  
Performance Measures ◽  
Accounting Performance ◽  
Performance Improvements ◽  
Future Performance ◽  
Nonfinancial Measures ◽  
Stock Market Performance ◽  
Nonfinancial Performance ◽  
Performance Consequences ◽  
Nonfinancial Performance Measures ◽  
Performance Measurement Systems

Firms are increasingly implementing new performance measurement systems to track nonfinancial metrics such as customer and employee satisfaction, quality, market share, productivity, and innovation. This study examines the implications of nonfinancial performance measures included in compensation contracts on current and future performance. Contextual factors, environmental factors, and strategic plans vary across firms and, in turn, adopting appropriate nonfinancial measures determines the performance consequences of such measures. Our findings support the contention that firms that employ a combination of financial and nonfinancial performance measures have significantly higher mean levels of returns on assets and higher levels of market returns. Although we find evidence that the adoption of nonfinancial measures improves firms' current and future stock market performance, we find only partial support for accounting performance improvements. Overall, the results indicate that the association between the use of nonfinancial measures and firm performance is contingent on the firm's operational and competitive characteristics.

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