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.

scholarly journals The differential effect of labour unrest on corporate financial performance

2015 ◽  
Vol 5 (3) ◽  
pp. 246-254
Author(s):  
Fortune Ganda ◽  
Collins C Ngwakwe
Keyword(s):  
Content Analysis ◽  
Financial Performance ◽  
Performance Measures ◽  
Empirical Data ◽  
Differential Effect ◽  
Corporate Financial Performance ◽  
Operating Profit ◽  
Paired Samples ◽  
Return On Capital ◽  
Financial Performance Measures

Heightening labour unrest episodes have inevitably generated important results on corporate financial performance. This paper provides first-hand, empirical data to illustrate the effect of labour unrest on firm performance before periods of labour unrest (2004 to 2008) and during periods of labour unrest (2009 to 2013) in South Africa’s mining sector. Content analysis was used to gather financial performance measures (Operating profit, Return on Capital Employed and Debt to Equity Ratios) of two mining firms. Then, t-test (paired samples) were utilised to analyse the data. The findings demonstrates that operating profit during labour unrest was lower when compared to operating profit before labour unrest for both company’s A and B. Return on Capital Employed results for five years before labour unrest was greater than ROCE during the labour unrest for both companies. Then, debt to equity during the labour unrest is greater than before labour unrest for the studied companies.

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 Non-Financial Performance Measures on Local Culture Basis in Assessing The Health of Microfinance Institutions

2017 ◽  
Vol 2 (3) ◽  
pp. 29-35
Author(s):  
I Putu Astawa ◽  
I Made Sudana ◽  
NGN Suci Murni
Keyword(s):  
Qualitative Study ◽  
Financial Performance ◽  
Performance Measures ◽  
Local Culture ◽  
Microfinance Institutions ◽  
Performance Measurements ◽  
Religious Activities ◽  
Product Model ◽  
Objective Health ◽  
Financial Performance Measures

Objective - Health assessment on microfinance institutions was conducted through non-financial measurements consisted of assessment on general and risk managements. The assessment was commonly used to assess commercial banks. Microfinance institutions, however, are differed to commercial bank in terms of their closeness to the poor. The paper presented the development and analysis of non-financial performance measures using local culture basis that can be applied to properly assess microfinance institutions. Methodology/Technique - Qualitative study with ethnomethodology approach was applied to see cultural activities undertaken. Managers were considered as key informants. Results of qualitative study were analyzed using Fuzzy-Analytic Hierarchy Process method and Weighted Product Model was applied to weight the criteria and sub-criteria as well as the final assessment. Findings - Results showed that local culture activities that could be used to assess general management in microfinance institutions were providing assistance in establishing places of worship, supporting religious activities, supporting the development of facilities and infrastructures in the villages, relief activities of cultural festival, helping in funeral, wedding favors, educational assistance, medical assistance, forming arts groups, and business group. Novelty - This study suggests that non-financial performance measurements can use local culture and facilitate the management of microfinance institutions to perform performance measurement Type of Paper - Empirical Keywords: Non-Financial; Performance Measures; Local Culture; Microfinance Institutions. JEL Classification: G21, G31.

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 Non-financial performance measures and pay-performance sensitivity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
MyoJung Cho ◽  
Salma Ibrahim
Keyword(s):  
Financial Performance ◽  
Performance Measures ◽  
Financial Risk ◽  
Shareholder Wealth ◽  
Performance Measure ◽  
Content Type ◽  
Financial Measures ◽  
Performance Sensitivity ◽  
Ceo Pay ◽  
Financial Performance Measures

Purpose This study aims to examine whether chief executive officer (CEO) pay-performance sensitivity to shareholder wealth is related to the use of non-financial performance measures in incentive contracts. Design/methodology/approach Using hand-collected performance measure data in a sample of S&P 500 firms across the period 1994–2010, this study investigates the sensitivity of CEO bonus and cash pay to shareholder wealth of firms that use non-financial performance (NFPM) measures of varying types and contractual weights in their bonus contracts along with financial measures (NFPM firms) in comparison to that of firms using financial measures only (FPM firms). Findings This study finds evidence that the pay-performance sensitivity is stronger in NFPM firms than in FPM firms. These results are driven by the use of CEO individual goals and operational efficiency. Furthermore, when using environmental, social and governance factors, the pay-performance sensitivity is stronger in terms of accounting performance only. This study also finds that using NFPM enhances pay-performance sensitivity more as their contractual weights increase and as financial risk increases. Practical implications These findings are important to stakeholders, and especially regulators in understanding incentive effects of alternative performance measures. This study also sheds light on what types of non-financial measures are better in helping firms align CEOs’ incentives to shareholders’ interests. Originality/value This study contributes to prior research on benefits of non-financial information within the context of executive compensation. This study presents original results about the effects of contractual weights of non-financial measures and financial risk on CEO pay-performance sensitivity. This study also presents new insights regarding how different types of non-financial measures affect CEO pay-performance sensitivity.

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