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Book part
Publication date: 8 September 2017

Hank C. Alewine and Dan N. Stone

The increasing use of complex, nonfinancial environmental performance measures in managerial decisions motivates consideration of contextual influences that potentially…

Abstract

The increasing use of complex, nonfinancial environmental performance measures in managerial decisions motivates consideration of contextual influences that potentially impact managerial judgments in environmental settings. This study extends general evaluability theory (GET: Hsee & Zhang, 2010) to environmental accounting by investigating the combined effects of evaluation mode and incomplete supplemental evaluability information (SEI; e.g., benchmark data) on management decisions. To elaborate, evaluation mode is the display format in which the accounting information system (AIS) provides available information for analysis; e.g., a manager’s or business unit’s performance is assessed either comparatively (i.e., in joint mode) or individually (i.e., in separate mode). GET suggests more decision weight on measures containing SEI in separate mode because that evaluation mode contains less context in which to analyze information. On the other hand, more decision weight should result for measures that do not contain SEI in joint mode because that mode already contains more context for analysis (e.g., comparing multiple performances with each other). To test these predictions, experimental participants (n = 53) evaluated environmental measures for factories with similar environmental performances. To operationalize the information available in many environmental AIS, some, but not all, performance measures contained benchmark data (incomplete SEI); factories were evaluated either jointly or separately. Participants evidenced decision intransitivity; i.e., in separate evaluation mode, factories rated higher when a favorable measure contained SEI, while in joint evaluation mode, factories rated higher when a favorable measure lacked SEI. The results extend previous AIS and management accounting research by investigating contextual influences, and potential systems design elements, in judgments using environmental AIS.

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Book part
Publication date: 3 July 2017

Michael L. Roberts, Bruce R. Neumann and Eric Cauvin

Prior research identified conflicts in implementing performance measurement systems that include both financial and non-financial measures. Attempts to incorporate…

Abstract

Purpose

Prior research identified conflicts in implementing performance measurement systems that include both financial and non-financial measures. Attempts to incorporate non-financial measures, for example, balanced scorecards (BSCs), have shown short-term success, only to be replaced with systems that rely on financial measures. We develop a theoretical model to explore evaluators’ choice and use of the most important performance measurement criterion among financial and non-financial measures.

Methodology/approach

Our model links participants’ prior evaluation experiences with their attitudes about relative accounting qualities and with their choice of the most important performance measure. This choice subsequently affects their evaluation judgments of managers who perform differentially on financial versus non-financial measures.

Findings

Experimental testing of our structural equation model indicates that it meets the accepted goodness of fit criteria. We conclude that experience has an influence on choice of performance measures and on decision heuristics in making such evaluations. We suggest that an “experience gap” must be considered when deciding which performance metrics to emphasize in scorecards or similar performance reports. We analyzed four accounting qualities, importance, relevance, reliability, and comparability and found that importance, relevance, and reliability have strong effects on how managers prioritize and use accounting measures.

Originality/value

We conducted our study in a controlled, experimental setting, including participants with diverse experiences. We provide direct evidence of participants’ experience and attitudes about the relative accounting qualities of financial and non-financial measures which we link to their choice of the most important performance measure. We link this choice to their performance evaluations.

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Book part
Publication date: 13 August 2018

Niran Subramaniam

Purpose – This study investigates the interplay between strategic performance measurement and management accounting to gain a deeper understanding of how strategic measures

Abstract

Purpose – This study investigates the interplay between strategic performance measurement and management accounting to gain a deeper understanding of how strategic measures of performance evolve with the managerial accounting practices.

Design/Methodology/Approach – The study explored the performance measures used at a bank focused on the development and sustainability initiatives in Africa. Thirty-two semistructured interviews were conducted with directors, managers, and analysts from nine different categories of job families.

Findings – Analysis shows that managers assimilate a comprehensive, multifaceted measurement system to understand the creation and delivery of sustainable value. The results show that the managerial accounting practices adapt to incorporate an integrated set of performance measures that afford sustainable value to the stakeholders. The findings provide rich insights into how the managers adapt their information assimilation practices to the changing demands of the different stakeholders and adopt practices which innovate measures of performance that are aligned to the strategic goals. Finally, the findings illustrate that the interplay between strategic performance and managerial accounting practices has the potential to improve or inhibit sustainable development.

Originality/Value – Little is known about how performance measures evolve, and how they interplay with the managerial accounting practices within organizations. This study reveals that the interplay of strategic performance measurement and managerial accounting can only be understood in the confluence of organizational change and sustainability. While acknowledging the need to embrace change and sustainability simultaneously, the study offers insights into the dynamics of change – the duality of emergent managerial accounting practices and the evolution of strategic performance measurement systems.

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Article
Publication date: 1 June 2004

Jean‐François Henri

The aim of this paper is to bridge the gap between the organizational effectiveness (OE) models developed in the field of organizational theory and the performance

Abstract

The aim of this paper is to bridge the gap between the organizational effectiveness (OE) models developed in the field of organizational theory and the performance measurement models presented within the management accounting literature. The specific evolution of these two complementary streams of research stemming from two different fields of research are reconciled and integrated by analyzing their convergences and divergences. As a response to theoretical and practical pressures, the evolution of OE models reflects a construct perspective, while the evolution of performance measurement models mirrors a process perspective. Performance measurement models have moved from a cybernetic view whereby performance measurement was based mainly on financial measures and considered as a component of the planning and control cycle to a holistic view based on multiple nonfinancial measures where performance measurement acts as an independent process included in a broader set of activities. This paper contributes to the performance measurement literature by establishing the origins of the performance measurement models and by shedding light on unexplored fertile areas of future research.

Details

Managerial Finance, vol. 30 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 1 January 2012

Ibrahim El‐Sayed Ebaid

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance

Abstract

Purpose

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the emerging capital market of Egypt.

Design/methodology/approach

The regression models are estimated using OLS to investigate the relative and incremental value relevance of accounting‐based performance measures. The relative value relevance tests are used to examine which performance measures better explain stock returns. The study also uses the incremental value relevance tests to examine whether one of these measures provides value‐relevance data beyond that provided by another.

Findings

The results of the empirical tests indicate that relative and incremental value relevance tend to increase when moving down in the income statement, with net income having the largest relative and incremental value relevance while total sales have the lowest relative and incremental value relevance. Also, all of the accrual‐based performance measures have relative and incremental value relevance statistically higher than that of operating cash flows.

Research limitations/implications

The results highlight the importance of accounting‐based performance measures in Egypt. The results shed light on the fixation on net income that is bottom line performance measure in the income statement where net income has the highest value relevance to Egyptian capital market. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.

Originality/value

This study presents extended research on the usefulness of accounting‐based metrics as proxies for firms' performance in Egypt as one of emerging markets.

Details

Management Research Review, vol. 35 no. 1
Type: Research Article
ISSN: 2040-8269

Keywords

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Article
Publication date: 1 January 2005

Jan Noeverman, Bas A.S. Koene and Roger Williams

This paper focuses on the need to revise the conceptualisation and measurement of evaluative style in future Reliance on Accounting Performance Measures (RAPM) research…

Abstract

This paper focuses on the need to revise the conceptualisation and measurement of evaluative style in future Reliance on Accounting Performance Measures (RAPM) research. Based on a review of the existing literature, we identify a number of issues in the conceptualisation and measurement of evaluative style and conclude that none of the existing measures is ideal for use in future research. We see two general dimensions of evaluative style that need specific attention in future research. The first dimension addresses the evaluative focus of the superior (e.g. budgets, other quantitative targets, short or long‐term targets, etc.). The second dimension addresses the superior’s way of handling the evaluation process (e.g. rigid or flexible, fixing blame, using it as a learning opportunity, etc.). Building on these two dimensions, there i a need for studies that assess how specific performance measures are used in different way within a particular organisational context, enabling a distinction between the design and the use of control tools. These conclusions suggest a need for qualitative indepth field studies within single organisations rather than quantitative survey research across organisations in future research on evaluative style and its behavioural consequences.

Details

Qualitative Research in Accounting & Management, vol. 2 no. 1
Type: Research Article
ISSN: 1176-6093

Keywords

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Book part
Publication date: 1 January 2012

Ioannis C. Thanos and Vassilis M. Papadakis

The main aim of this chapter is to review the use of accounting-based measures of merger and acquisition (M&A) performance. To do so, we conducted a keyword search in 28…

Abstract

The main aim of this chapter is to review the use of accounting-based measures of merger and acquisition (M&A) performance. To do so, we conducted a keyword search in 28 leading management journals and one edited book (i.e., Advances in Mergers & Acquisitions). To complement our review, we draw on very recent literature reviews of M&As (e.g., Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35(3), 469–502; Kolev, Haleblian, & McNamara, 2012; Meglio, 2009). Results indicate that accounting-based measures of performance have been used in 36 studies. Also, in these studies, there exists much heterogeneity with respect to the operationalization of M&A performance, the time lag, and the level of analysis. Next, the chapter proceeds with the discussion of the advantages and disadvantages of accounting measures and the proposition of four substantive priorities for future research in the area.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78052-196-1

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Article
Publication date: 1 May 2005

Krishan M. Gupta and A. Gunasekaran

Faced with new wealth creation paradigm, triggered by technology and relentless globalization of markets, increasing number of companies are becoming knowledge‐based…

Abstract

Purpose

Faced with new wealth creation paradigm, triggered by technology and relentless globalization of markets, increasing number of companies are becoming knowledge‐based enterprises. This paper aims to discuss the change in enterprise environment; evolution of performance and cost measures; and the challenges for managerial accounting researchers and practitioners in developing value‐based costing and performance measurement systems (PMS).

Design/methodology/approach

A conceptual discussion and approach are taken.

Findings

Internet and e‐commerce have changed forever the way companies conduct their businesses. Virtual enterprise and efficient supply chain management systems will shape the future of these enterprises. Organizations are trying to become agile enterprises with the help of strategic alliances of firms and integration using information technologies. Traditional performance and cost measures are no longer suitable for developing and managing enterprises in the so‐called new environment. In order to remain relevant and to add value, cost and performance measures must be designed and systematically evaluated to reduce the often‐unnoticed mismatch between strategic goals and operational tactics.

Research limitations/implications

Suggestions are presented for future research directions in managerial accounting areas that would address the requirements of new economy enterprises.

Originality/value

Alerts managerial accounting researchers and practitioners to develop new costing and PMS taking into account the new enterprise environment.

Details

Managerial Auditing Journal, vol. 20 no. 4
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 1 September 1994

Barbara J. Askren, James W. Bannister and Ellen L. Pavlik

Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982;…

Abstract

Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982; Larcker, 1983). Following conflicting empirical evidence related to the stock market reaction associated with the adoption of accounting‐based long‐run performance plans, this study seeks to gain further insight into the effect of such plans on accounting income‐based and value added‐based measures of productivity and return. The results indicate that firms adopting accounting‐based performance plans do not experience any greater gains in accounting return or productivity measures than do a set of control firms. Thus, such plans may not have the intended effect. Because performance plans are a popular method of executive incentive compensation, further research on the impact of these plans is indicated.

Details

Managerial Finance, vol. 20 no. 9
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 23 November 2016

Hank C. Alewine and Timothy C. Miller

This study explores how balanced scorecard format and reputation from environmental performances interact to influence performance evaluations.

Abstract

Purpose

This study explores how balanced scorecard format and reputation from environmental performances interact to influence performance evaluations.

Methodology/approach

Two general options exist for inserting environmental measures into a scorecard: embedded among the four traditional perspectives or grouped in a fifth perspective. Prior balanced scorecard research also assumes negative past environmental performances. In such settings, and when low management communication levels exist on the importance of environmental strategic objectives (a common practitioner scenario), environmental measures receive less decision weight when they are grouped in a fifth scorecard perspective. However, a positive environmental reputation would generate loss aversion concerns with reputation, leading to more decision weight given to environmental measures. Participants (N=138) evaluated performances with scorecards in an experimental design that manipulates scorecard format (four, five-perspectives) and past environmental performance operationalizing reputation (positive, negative).

Findings

The environmental reputation valence’s impact is more (less) pronounced when environmental measures are grouped (embedded) in a fifth perspective (among the four traditional perspectives), when the environmental feature of the measures is more (less) salient.

Research limitations/implications

Findings provide the literature with original empirical results that support the popular, but often anecdotal, position of advocating a fifth perspective for environmental measures to help emphasize and promote environmental stewardship within an entity when common low management communication levels exist. Specifically, when positive past environmental performances exist, entities may choose to group environmental performance measures together in a fifth scorecard perspective without risking those measures receiving the discounted decision weight indicated in prior studies.

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