Trading off financial and non-financial performance information to evaluate state-owned enterprise performance – a process tracing-experiment

Abstract

New public management initiatives have pushed municipal authorities to evaluate state-owned enterprises (SOEs) based on multidimensional performance reports. Little is known, however, about policymakers’ pre-decisional information search and tradeoff processes between different performance dimensions when evaluating SOE performance. We apply a mouse-cursor-tracking experiment with a master students sample and show that participants consider multiple performance dimensions but focus their attention on financial and customer performance information when evaluating SOEs for allocating a budget. We also observe a tradeoff between financial and non-financial performance information in participants’ budget allocations. Finally, we show that participants devote more effort to the performance evaluation process when municipalities’ financial resources are scarce. However, the municipalities’ financial status affects neither the attention paid to financial and non-financial performance nor the budget allocation decisions.