Application of Financial Performance Measures to New Performance Measurement Tools

2004 ◽  
Author(s):  
Igor Gvozdanovic
Keyword(s):  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Measurement Tools ◽  
Financial Performance Measures

scholarly journals Questioning the context of corporate performance measures in benchmarking CEO compensation

2015 ◽  
Vol 13 (1) ◽  
pp. 945-957 ◽  
Author(s):  
Merwe Oberholzer ◽  
Jaco Barnard
Keyword(s):  
Content Analysis ◽  
Performance Measurement ◽  
Financial Performance ◽  
Special Reference ◽  
Agency Theory ◽  
Performance Measures ◽  
Performance Measurements ◽  
Future Studies ◽  
Ceo Pay ◽  
Financial Performance Measures

The purpose of the study was to reflect on existing practices in studying the CEO pay performance issue, with special reference to the context wherein the financial performance measurements were employed. In total, an in-depth content analysis of 40 published articles was done. Some flaws were identified in prior research, namely some studies only use either market-based or accounting-based measurements, only a single performance measurement, measurements without the context of the subjacent risks, monetary values without substance as performance measurements and without the context of a theory. The contribution of this study is that a framework is developed to guide future studies with regard to the context wherein financial performance measures should be employed and that some theories, additional to the agency theory, were identified that should be tested more frequently in pay performance-related studies.

Divisional performance measurement in the retail financial service sector

2017 ◽  
Vol 66 (2) ◽  
pp. 180-195
Author(s):  
Ben Kwame Agyei-Mensah
Keyword(s):  
Regression Analysis ◽  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Economic Performance ◽  
Management Accounting ◽  
Performance Measure ◽  
Financial Service ◽  
Content Type ◽  
Financial Performance Measures

Purpose Focussing on responsibility theory of management accounting, the purpose of this paper is to test how performance measurements are applied in divisionalised financial service companies. Management accounting theory suggests that two different measures of branch performance should be computed: one to evaluate the economic performance of each branch and the other to evaluate the performance of branch managers (managerial performance). It also advocates that the evaluation of a manager’s performance should consist of only those factors under his or her control. That is, divisionalised performance measurement should be based on the application of the controllability principle, the study also identified the contingent factors that impinged on the selection of performance measures and the allocation of common costs (ACCs) to branches. Design/methodology/approach Using a survey questionnaire and analysis of financial statements of the 129 respondent companies the application of financial performance measures: non-financial performance measures and ACCs were tested. For the purpose of this study, dummy variables were assigned to represent whether or not an item is used, if an item is used 1 is assigned to that item and 0 if an item is not used. The values assigned were then summed up to represent the total score for each company. Descriptive statistics and regression analysis was performed to test the six hypotheses of the study. Findings The study found that a substantial majority of respondents used different performance measures to evaluate the performance of their branch managers and the economic performance of branches. Both financial and non-financial performance measures were equally used in measuring the performance of branches and branch managers. The study also found that branch managers do not have full autonomy and control over the allocation of common resources costs which form part of their evaluation, even though accounting theory suggest that. The regression analysis results showed that firm size, liquidity and leverage were the factors that influence the decision to employ financial performance measures, non-financial performance measures and ACC by the respondent companies. Research limitations/implications Despite the popularity of the balanced scorecard it is surprising to note that none of the respondents have ever used this as a performance measure. The implication is that knowledge of this performance measure is very low among the respondents. The excessive use of uncontrollable factors in the measurement process can reduce the morale of the staff involve hence steps should be taken to reduce their use. Originality/value This is one of the few studies conducted on the application of performance measures in the financial services and also in a developing country setting. The findings would help organisations in both developing and developed economies to improve upon the application of performance measurement techniques in their branches/divisions.

scholarly journals Performance Measurement In Large Slovenian Companies: An Assessment Of Progress

2010 ◽  
Vol 14 (5) ◽  
Author(s):  
Mojca Marc ◽  
Darja Peljhan ◽  
Nina Ponikvar ◽  
Aleksandra Sobota ◽  
Metka Tekavcic
Keyword(s):  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Measurement System ◽  
Performance Measurement System ◽  
Successful Performance ◽  
Research Results ◽  
Financial Performance Measures ◽  
Integrated Performance ◽  
The Impact

The prevailing literature and empirical studies on management of organizational performance stress the increasing importance of non-financial performance measures and propose companies to implement some kind of integrated performance measurement system. The purpose of our study is to investigate the characteristics of performance measurement and management in large Slovenian companies, focusing also on the progress made in the 5-year period. The analysis is based on two surveys conducted in the spring 2003 and summer of 2008. We investigate what do companies understand by “successful performance”, what are the most and the least important performance measures for companies, and what performance measurement systems do companies use. By answering these questions we discuss the impact of our results on the future development and growth of firms. The research results show that large Slovenian companies consider “successful performance” mostly in terms of implementing the strategy, followed by pursuing the goals of the owners and achieving the goals of different stakeholders. Most large Slovenian companies perceive financial performance measures as more important than non-financial, although they claim they measure both perspectives of their business. Our research results also suggest that 68% of large Slovenian companies in our sample use balance scorecard or some other integrated performance measurement system. These findings are generally in line with the existing theory and empirical evidence from other countries. Our main conclusion is that the prevailing role of financial key performance indicators in large Slovenian companies is appropriate for monitoring the effects of the current financial crisis but if companies want to succeed in the long-run they have to base their decisions also on non-financial measures that enable monitoring of many important capabilities for achieving long-term strategic goals.

scholarly journals Performance measurement by small and medium enterprises in Cape Metropolis, South Africa

2016 ◽  
Vol 14 (2) ◽  
pp. 46-55 ◽  
Author(s):  
Caroline Chidinma Maduekwe ◽  
Peter Kamala
Keyword(s):  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Small And Medium Enterprises ◽  
Cash Flows ◽  
Management Support ◽  
Operating Income ◽  
Use Of Resources ◽  
Financial Performance Measures ◽  
Medium Enterprises

High failure rate of small and medium enterprises (SMEs) has been partly attributed to the use of inappropriate performance measures. This study seeks to determine the types of performance measures employed by SMEs, purpose for which performance measures are used, perceived effectiveness of performance measures used and factors that may inhibit SMEs from using both financial and non-financial performance measures. Data are collected using a questionnaire and analyzed using descriptive and inferential statistics. The findings of this study reveal that most of the sampled SMEs measure their performance using both financial and non-financial performance measures, albeit financial performance measures are used more frequently than the non-financial ones. Of the financial performance measures, the most popular ones are sales growth, cash flows, operating income and net profit margin. The most popular non-financial measures are customer focused. These include response time, customers’ satisfaction, percentage of repeat customers and customers’ complaints. The findings also reveal that performance measurement reports are used by the sampled SMEs mostly for monitoring the business, gauging the performance of the business, improving business processes, identifying problems and optimizing the use of resources. The findings further reveal that the performance measures used are perceived to be effective but that the lack of awareness, qualified personnel, top management support, required resources such as computers, had, to some extent, inhibit SMEs from using the appropriate performance measures. This study not only fills in the gap in the literature on performance measurement by SMEs, but also provides invaluable insights on the extent to which these entities use different performance measures. These insights could inform future government interventions meant to avert the high failure rates of these entities and also aid SMEs to gauge their performance measurement practices with a view to adopt the best practices or avoid factors that could inhibit them from using these practices

scholarly journals Performance measurement and NPOs' effectiveness: does internal stakeholders' trust matter? Evidence from Palestine

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Aboramadan ◽  
Khalid Abed Dahleez ◽  
Caterina Farao ◽  
Mohammed Alshurafa
Keyword(s):  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Structural Equation ◽  
Mediating Effect ◽  
Equation Modeling ◽  
Content Type ◽  
Positive Effects ◽  
Financial Performance Measures ◽  
Internal Stakeholders

PurposeThis study proposes a model of the effect of financial and non-financial performance measures on nonprofit organizations’ (NPOs’) effectiveness where internal stakeholders' trust play an intervening role in the aforementioned relationships.Design/methodology/approachData were collected from 218 employees working at the largest Palestinian NPOs. The perceptions of these employees were used to measure the variables, and structural equation modeling was used to examine the hypotheses.FindingsResults suggest that the use of financial and non-financial performance measures was positively related to NPOs' effectiveness. Internal stakeholders' trust showed a significant mediating effect between the use of performance measures and NPOs' effectiveness.Practical implicationsThis study may be of value for NPOs' managers due to the positive effects performance measurement (PM) can have on NPO effectiveness. Managers and boards should seek to enhance their internal stakeholders' trust to achieve higher levels of effectiveness.Originality/valueThis study has three main contributions. First, it is one of the very few papers which empirically examines the links between PM and NPOs' effectiveness, rather than providing conceptual lens. Second, the paper investigates the role of stakeholders' trust as a mediating mechanism in the proposed model, a topic that has been neglected by NPOs governance researchers. Finally, the study uses data from the Palestinian context, contributing to the PM literature by providing evidence on the relationship between performance measures and NPOs' effectiveness from a non-Western context.

scholarly journals Towards integrating environmental performance in divisional performance measurement

2014 ◽  
Vol 3 (3) ◽  
pp. 16-21
Author(s):  
Collins Ngwakwe
Keyword(s):  
Performance Measurement ◽  
Financial Performance ◽  
Performance Measures ◽  
Environmental Performance ◽  
Environmental Governance ◽  
Corporate Sustainability ◽  
Performance Measure ◽  
Suggested Approach ◽  
Environmental Performance Measurement ◽  
Financial Performance Measures

This paper suggests an integration of environmental performance measurement (EPM) into conventional divisional financial performance measures as a catalyst to enhance managers’ drive toward cleaner production and sustainable development. The approach is conceptual and normative; and using a hypothetical firm, it suggests a model to integrate environmental performance measure as an ancillary to conventional divisional financial performance measures. Vroom’s motivation theory and other literature evidence indicate that corporate goals are achievable in an environment where managers’ efforts are recognised and thus rewarded. Consequently the paper suggests that environmentally motivated managers are important to propel corporate sustainability strategy toward desired corporate environmental governance and sustainable economic development. Thus this suggested approach modestly adds to existing environmental management accounting (EMA) theory and literature. It is hoped that this paper may provide an agenda for further research toward a practical application of the suggested method in a firm.

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