Non-financial Measures Research Articles

CEO Compensation Contracts in Family Versus Nonfamily Firms: The Use of Nonfinancial Performance Measures

ABSTRACTResearch Question/IssueThis study examines the association between ownership type—family versus nonfamily firms—and CEO family status—family CEO versus professional CEO—and the use of nonfinancial performance measures (NFPMs) in CEO compensation contracts.Research Findings/InsightsUsing a sample of 3143 firm‐year observations of S&P 500 nonfinancial firms from 2010 to 2018, we find that family firms place a significantly lower weight on NFPMs in CEO compensation contracts than nonfamily firms. Within family firms, we find that a significantly lower weight is placed on NFPMs in compensation contracts for family CEOs relative to those for professional CEOs. Furthermore, additional tests indicate that the negative association between family ownership and the weight placed on NFPMs is stronger (weaker) in firms with low (high) stakeholder visibility.Theoretical ImplicationsWe advance the academic literature on the selection of performance measures in compensation contracts by providing insight into the implications of family ownership and of a CEO's family ties for the use of NFPMs. The results suggest that because family firms have a good ability and a strong incentive to directly monitor and control their CEO's actions, NFPMs are less needed in CEO compensation contracts as a means to align goals. Furthermore, the effects we document are even stronger when the CEOs of family firms are family members.Practitioner/Policy ImplicationsThe results imply that while family firms may not need a high weight on NFPMs in CEO compensation contracts to monitor their CEOs' actions, goal alignment, and internal communication of nonfinancial targets, they may still need them for communication and signaling purposes when exposed to external stakeholder monitoring.

A comparison of the usage between financial and non-financial performance metrics in Small and Medium Enterprises (SMEs) in South Africa

The purpose of this study is to explore the performance measurement approach of small and medium enterprises (SMEs) in the South Durban region of South Africa. It has long been known that small and medium enterprises (SMEs) play an important role in economic growth and income distribution in the world's major economies. However, due to globalisation, the fourth industrial revolution and increased competition from multinationals, South African SMEs face new challenges in measuring their performance. To respond to these challenges, SMEs must adopt efficient and effective performance measurement models. However, currently, according to the researchers, there is no such performance measurement framework. This study aims, among others, to close this gap in the literature. This study uses a deductive, positivist research design to comprehensively explore performance measurement practices in small and medium enterprises (SMEs) in a given region. Based on Morgan's sample size table, size 217 was chosen. The use of financial and non-financial performance measures is preferred by SMEs as it shows better performance compared to only one measure. In addition, the study found a positive correlation between business size and age, indicating that larger businesses tend to be older.The results of this study help to understand the complex relationship between job dimensions, age, and performance, highlighting the importance of choosing appropriate performance measures. Future research is recommended to gain a deeper understanding of these relationships and how they vary across contexts and sectors.

EXPORT POTENTIAL OF KYRGYZSTAN IN THE AGRO-INDUSTRIAL COMPLEX

The article examines the export potential of Kyrgyzstan in the agro-industrial complex. The unique geographical location of the country and eco-friendly agriculture contribute to the cultivation of fruits with a large amount of useful micronutrients. In such conditions, Kyrgyz products receive certificates of compliance with international standards. Financial and non-financial export support measures by the Government of the country and the EAEU help farmers to promote their products on international markets.In turn, in the UAE one can observe an increase in the popularity of organic products, including dried fruits. Customs agreements have been concluded between the countries, contributing to stable cooperation. To assess the prospects of trade relations between the countries, the authors conducted a PEST and SWOT analysis. The article presents recommendations for the promotion of Kyrgyz dried fruits in the UAE market.

External Nonfinancial Measures in Substantive Analytical Procedures: Contributions of Weather Information

ABSTRACT Recent studies and new standards suggest that auditors can use information from expanded external sources to verify their clients’ financial information. We propose advanced substantive analytical procedures with external nonfinancial measures derived from weather information to test whether it helps detect misstatements. Using computational simulations and daily store-level sales data, we test whether the proposed procedures with weather indicators outperform the procedures without such indicators in substantive analytical procedures to identify overstated daily store sales. For the multilocation retail firm examined in this study, we find that the models with one or more weather indicators perform better at detecting misstatements than the models without them. When the reliability of relevant internal information is in question, the usefulness of weather indicators is apparent. Overall, our results provide evidence suggesting the potential value of external nonfinancial measures in auditing.

Post-Pandemic Retail Design: Human Relationships with Nature and Customer Loyalty—A Case of the Grand Bazaar Tehran

This article examines how human relationships with nature in the design of the Tehran Grand Bazaar can impact customer loyalty, and how this impact has been affected by the recent pandemic. As one of the most popular retail settings of the ancient Silk Road, the Grand Bazaar has a long history of micro-scale retailing and customer loyalty. This article reviews international guidelines of sustainable design using content analysis, identifying the most frequent guidelines related to human relationships with nature. It then defines customer loyalty in terms of various important non-financial measures of micro-scale retailing. The present article describes the development and collection of a structured survey conducted before the pandemic (March 2019), during the pandemic (March 2021), and after the pandemic (March 2023). The analysis shows a moderate to high relationship between sustainable design elements of the Bazaar (in terms of human relationships with nature) and customer loyalty before the COVID-19 pandemic. While this relationship fell to a moderate level in the middle of the pandemic, it rose dramatically to 89% by the end of the third year when governments eased public health and safety protocols. The results reveal that by adapting sustainable strategies that enhance human relationships with nature, designers and stakeholders can create post-pandemic retail settings that generate high customer loyalty.

Entrepreneurs can create a better tomorrow: The relationship between entrepreneurial grit, nonfinancial success, and societal impact

ABSTRACT Entrepreneurial grit, defined as passion and perseverance for long-term goals, has repeatedly been linked to higher venture performance. In this paper, we theorize that higher levels of grit may also lead to more nonfinancial success and stronger societal impact for entrepreneurs and that anxiety is a negative moderator in these relationships. We test our model among 1,398 German entrepreneurs in a broad range of industries and find support for our hypotheses. We contribute by uncovering grit as a novel determinant for the nonfinancial success measures of personal fulfillment and workplace relationships, as well as for societal impact, and by shedding light on the role of negative emotions as attenuators in these relationships.

Linking Corporate Social Responsibility and Organizational Performance in WH Industrial Holdings Company in China

The main objective of this study is to analyze the relationship between corporate social responsibility and organizational performance of WH Industrial Holdings Company. The study identified the profile of the respondents and determined the level of organizational performance in terms of financial and non-financial measures as assessed by the employees and how the employees perceive the corporate social responsibility practices of the company relative to economic, legal, ethical and philanthropic/discretionary aspects. It also determined how other stakeholders describe the CSR practices of the company.

Role of Microfinance Institutions in Ethiopian Economy: A Review

This work reviews the role of microfinance institutions in the Ethiopian economy, which was done by using a balanced scorecard (BSC) performance review approach that integrates both financial and nonfinancial metrics. The BSC framework of the review was developed using a total of performance indicators that were equally categorized under BSC perspectives (financial, customer, internal business processes, and learning and growth). The developed framework was applied to MFIs operating in Ethiopia, which have head offices in all regional capitals of the country and report to the Association of Ethiopian Microfinance Institutions (AEMFI) starting in 2010–2012 consecutively. The work of the review shows that based on their financial role, on average, the institutions reviewed are sustainable with high relative productivity and low profitability. The average non-financial performance is also high, indicating that the reviewed institutions are highly performing in both non-financial and financial measures. Beside the role performance, the work of this review confirmed the relationship assumption of BSC perspectives and it shows a positive correlation among them. The review concludes that comprehensive performance is observed when it is measured in a collective way. So, Ethiopian MFIs suggested paying attention to the use of BSC as a performance measurement tool and as a hub for specified role indicators that need enhancement.

Aligning performance metrics with business strategy

PurposeThis study examines whether different strategy archetypes deploy specific performance metrics to support their strategic goals and priorities. If so, does alignment of strategy and metrics positively impact organisational performance?Design/methodology/approachThe conceptual framework and hypotheses are couched in Contingency Theory. The role of business strategy as a moderating variable is tested using MANOVA, followed by post hoc pairwise comparisons. The results are based on cross-sectional survey data from 372 manufacturing and service organisations in Italy.FindingsThe overall contingency effect of business strategy in selecting and deploying performance metrics and their effect on organisational performance is supported. However, the group-wise post hoc analyses show support only for Prospectors but not for Defenders and Analysers.Research limitations/implicationsThis research lends further support in favour of the Contingency Theory from a new geographic context (Italy) that there are no universally best performance metrics that drive organisational performance. However, more research is needed to understand why the theory only holds for certain strategic archetypes and not across all archetypes.Practical implicationsManagers can direct resources and effort towards designing and deploying the “right” type of performance metrics suitable for their strategic orientation and thus optimise organisational performance.Originality/valueThis is a rare study that tests the moderating role of business strategy using all four strategic archetypes of the Miles and Snow typology. It deploys both financial and non-financial measures and uses a very large sample of both manufacturing and service organisations from a relatively unexplored region of the world. The study provides additional evidence in favour of the Contingency Theory whilst advocating for more research to refine our understanding of why the contingency perspective is not so important for firms that are not the first-in.

THE APPLICATION OF BALANCED SCORECARD SYSTEM AS A COMPREHENSIVE PERFORMANCE MEASUREMENT FRAMEWORK FOR JOINT STOCK COMPANIES

This thesis aims to explore the application of the Balanced Scorecard (BSC) system as a comprehensive performance measurement framework for joint stock companies. The Balanced Scorecard is a strategic management tool that provides a holistic view of organizational performance by incorporating financial and non-financial measures. This research investigates the benefits, challenges, and practical implementation of the BSC system in the context of joint stock companies.

Motivation and responsibility of employees of primary health care facilities: results of a social survey on current motivation measures

Aim. To study the relevance of motivation measures based on the survey of medical staff.Material and methods. Medical staff of adult primary health care facilities was surveyed using an original questionnaire regarding the organization of work, the importance of financial and non-financial incentives. The survey was strictly voluntary and anonymous, and conducted electronically and on paper. In total, 35191 questionnaires were accepted for processing. Processing was carried out using the method of descriptive statistics.Results. The organization of work environment is of the greatest importance to respondents (>80%), while in second place is the presence of clear criteria for work efficiency assessment, and in third place — a clear incentive and penal scheme. Respondents rated the opportunity for contact with the administration more highly than "communicating work assessment criteria to employees". The undisputed top in financial incentives is payments for high performance criteria in all categories of personnel. Of the non-financial measures, the most popular were a letter of gratitude from the manager and permission to independently plan working hours (maximum among medical specialists (51%)).Conclusion. The results obtained make it possible to highlight the main directions for motivation system of medical staff as follows: clear evaluation criteria for all personnel categories, provision of conditions for fulfilling the developed criteria, active outreach on evaluation criteria, incentive payments and other measures of material incentives, development of targeted incentive technologies, feedback with employees on issues related to their performance, working conditions, etc., developing a system of non-financial incentives and corporate culture.

Analysis The Impact and Mechanisms of Firms' ESG Performance on Their Financing Constraints--Evidence from Chinese Listed Companies

ESG performance is a significant non-financial measure used to assess a company's environmental, social responsibility, and corporate governance. Its influence on a company's financing constraints has increasingly become a research focus in the field of sustainable development and ecological civilization construction. This paper explores the impacts and mechanisms of ESG performance on firms' own financing constraints, and finds that: the enhancement of firms' ESG performance can alleviate their own financing constraints; firms' enhancement of ESG performance can alleviate their own financing constraints through the channel of improving the firms' information transparency; firms' enhancement of ESG performance can alleviate their financing constraints more strongly in the samples with a high proportion of the entire majority shareholders' holdings and those from the eastern part of China.

Effect of Non-Financial Measures of Business Operations on Financial Performance of Deposit Money Banks in Nigeria

This study investigates the effect of non-financial measures of business operations on financial performance of deposit money banks in Nigeria. The study specifically studied the effect of customer satisfaction, service quality delivery, employee development and corporate social responsibility on return on equity of deposit money banks in Nigeria. The study total population is 780 staff of the banks. The study adopted Taro Yamane to obtain a sample of 264 respondents. Questionnaire was distributed to the respondents and only 224 questionnaires were returned. Analysis was carried out based on the number of questionnaire returned. The relationships between the variables were analyzed using regression analysis. The study found a significant relationship between customer satisfaction, product and service quality and employee development and return on equity. The study however, found no relationship between corporate social responsibility and return on equity. The study therefore, concludes that non-financial measures of business operations actually influence financial performance of deposit money banks in Nigeria. The study recommends that: banks should place priority on customer satisfaction if they want to increase their returns; develop more innovative products and invest more in new technology; train and retrain their employees in the use of new technologies.

Non-financial resources to enhance companies’ profitability: a stakeholder perspective

PurposeThis study aims to investigate the impact of stakeholders’ nonfinancial resources (NFRs) on companies’ profitability, filling a significant gap in the literature regarding the role of NFRs in value creation.Design/methodology/approachData from 76 organizations from 2017 to 2019 were collected and analyzed. Four primary NFRs and their key value drivers were identified, representing core elements that support different dimensions of a company’s performance. Statistical tests examined the relationship between stakeholders’ NFRs and financial performance measures.FindingsWhen analyzed collectively and individually, the results reveal a significant positive influence of stakeholders’ NFRs on a firm’s profitability. Higher importance assigned to NFRs correlates with a higher return on sales.Originality/valueThis study contributes to the literature by empirically bridging the gap between stakeholder theory and the resource-based view, addressing the intersection of these perspectives. It also provides novel insights into how stakeholders’ NFRs impact profitability, offering valuable implications for research and managerial practice. It suggests that managers should integrate nonfinancial measures of NFRs within their performance measurement system to manage better and sustain companies’ value-creation process.

Intellectual capital and bank’s performance: a cross-national approach

PurposeThis study aims to identify the impact of intellectual capital (IC) on the bank’s performance using a cross-country approach with India and Gulf Cooperation Council (GCC) countries using the Skandia navigator model (SNM).Design/methodology/approachThis study uses a mixed-methods research approach by taking financial and non-financial measures to assess the impact of the IC on the bank’s performance using the SNM. The study implies an analysis of the data from the top ten banks in India and twenty banks in GCC countries. The selection was done based on the volume of the bank’s business for three years (2019–2020, 2020–2021 and 2021–2022).FindingsThe research has three main findings: there is a positive impact of IC on the bank’s performance; amongst the factors of SNM, there is a direct impact of human capital and customer focus on the performance of the selected banks in both India and GCC countries; and the other factors of SNM such as structural capital and process focus, renewal and development focus also affect the selected banks.Research limitations/implicationsThe outcomes of the research may be useful for policymakers in India and GCC countries, as it identifies IC components that have a significant impact on the bank’s performance. This might enable them to develop policies that foster such factors, which, consequently, will improve the performance of the banks in the selected countries.Originality/valueThis study is an attempt to fill the gap in the existing literature on IC and bank’s performance for two different types of countries using the SNM.

The Interactive Effect of Cognitive Frame and Performance Measurement System Scope on Managers’ Choice of Sustainable Suppliers

ABSTRACT Managerial response to stakeholders’ demands for profitability and sustainability can have long-lasting effects on organizations, stakeholders, and society. In an era dominated by business-case thinking, managers’ cognitive processes are particularly important. Yet alternatives to business-case thinking are underexamined. Operationally, to help direct attention toward sustainable goals, organizations implement performance measurement systems (PMS) with varying scope differences in the composition of financial and nonfinancial measures. To date prior research is inconclusive regarding the effectiveness of such actions. This study responds by mobilizing paradoxical thinking, an alternative form of cognition posited to better support complex managerial decisions. Experimentally, I investigate how cognitive frames moderate the effect of a broad versus narrow PMS in sustainable decision making. The results reveal managers who approach sustainable decisions with a paradoxical cognitive frame and are evaluated using broad PMS select more sustainable suppliers. These findings are important given the social and environmental implications of sustainability judgments.

Management Accounting Research Opportunities in Climate Change Reporting

ABSTRACT Climate risk is a critically important challenge for society. Current accounting-related efforts include initiatives by regulators to promulgate climate risk disclosure standards, focusing on disclosure of nonfinancial and forward-looking information. These proposals are certain to evolve over time. With management accounting research’s focus on decision-making and performance evaluation using nonfinancial performance measures and effective management control systems, management accounting researchers are in a strong position to provide unique input into the ongoing development of these reporting standards. In this commentary, we discuss topics where management accounting researchers can contribute to the standard-setting efforts. Contributing to these efforts requires a change in mindset for management accounting researchers from primarily focusing on internal and potentially idiosyncratic decision-makers to a broader audience that includes external providers of capital. However, the reward to doing so is participation in interesting and important research avenues that can have a real impact on society. JEL Classifications: M49; M48; M14.

The Integral Role of Accounting in Organizational Dynamics and Decision-Making

Purpose: The purpose of this research is to explore the integral role of accounting in organizational dynamics and decision-making processes. Research Design and Methodology: The study employs qualitative research methodology, conducting a systematic review of literature. The research design involves structured searches across academic databases and online repositories, utilizing predefined search terms and inclusion criteria. The primary data collection method is the systematic review of literature, supplemented by citation chaining and reference list scanning to enhance the breadth and depth of the literature review. Findings and Discussion: The findings reveal that accounting plays multifaceted roles in organizational dynamics, including financial management, governance, risk management, and strategic decision-making. Transparent and reliable financial reporting serves as a foundation for stakeholders to assess organizational performance and make informed decisions. Integration of non-financial performance measures alongside financial metrics enhances decision-making effectiveness and strategic alignment. Implications: The study underscores the importance of continuous adaptation and innovation in accounting practices to navigate evolving business environments successfully. Moreover, technological advancements, globalization, and regulatory reforms significantly impact accounting practices and organizational dynamics, presenting both opportunities and challenges.

The Effects of Governance Practices on the Performance of the Sri Lankan Public Sector Development Projects

The use of Project Governance Practices (PGPs) is increasingly taking a substantial stage in developing economies, particularly in a newly industrializing nation like Sri Lanka where public sector development projects have been implemented to expedite the nation's growth and prosperity. As it is essential to lay a transparent and tangible foundation for an effective public sector that can be sustained, the paper focuses on the significance of PGPs in enhancing the performance of the Sri Lankan public sector development initiatives. Structuring, normalizing, facilitating, and post-conflict-sensitive variables were used to measure the PGPs, whereas financial and non-financial performance measures were employed to evaluate the project performance. The researcher conducted direct observations and administered a comprehensive Likert-scaled questionnaire to 518 project administrators involved in various Sri Lankan public sector development projects, specifically focusing on projects related to irrigation, roads and highways, water and sanitation, and other infrastructure developmental projects. The data was analyzed using the structural equation modeling through the AMOS software. The results showed that PGPs created a considerable improvement in project performance, which increased support for expanding economic prosperity through balanced development strategies and sustainability-based policy formation.
 Keywords: Performance, Project governance practices, Public sector development projects, Sri Lanka

Analyzing the Causal Relationship among Performance Indicators in the Public Sector Balanced Scorecard: Empirical Evidence from the Directorate General of Taxes in Indonesia

This study examines causal relationships in the Public Sector Balanced Scorecard framework, using the Indonesia Directorate General of Taxes as a case study. Traditional financial measurements have been criticized for focusing on past activity, neglecting intangible assets, and lacking effective strategy testing (Kaplan & Norton 1992; Dearden 1987). To overcome these limitations, organizations have adopted strategic measurement tools like the Balanced Scorecard (Kaplan and Norton, 1996a). The Balanced Scorecard aligns an organization's vision, mission, and strategies with objectives and measures across four perspectives: financial, customer, internal process, and learning and growth (Kaplan and Norton 1992; 1996a). The presence of causal relationships across these perspectives, enabling non-financial measures to predict financial outcomes, has been a subject of scholarly debate (Nooreklit 2000,2003; Norreklit and Mitchell 2007). This study aims to contribute to the understanding of causal relationships in the PSBSC by investigating the implementation of the Balanced Scorecard in the DGT and its potential to improve organizational performance. Given Indonesia's fiscal deficit and below-average tax ratio performance, this research provides an alternative policy perspective for enhancing the institutional capacity of the DGT and achieving higher tax revenue and compliance rates. Keywords: Balanced Scorecard, Public Sector, Performance Management, Path Analysis