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Open Access
Article
Publication date: 27 January 2023

Alex Almici

This paper aims to verify whether the integration of sustainability in executive compensation positively affects firms’ non-financial performance and whether corporate governance…

3297

Abstract

Purpose

This paper aims to verify whether the integration of sustainability in executive compensation positively affects firms’ non-financial performance and whether corporate governance characteristics enhance the relationship between sustainability compensation and firms’ non-financial performance and to expand the domain of the impact of sustainability on non-financial performance.

Design/methodology/approach

This analysis is based on a sample of companies listed on the Milan Italian Stock Exchange from the Financial Times Milan Stock Exchange Index over the 2016–2020 period. Regression analysis was used by using data retrieved from the Refinitiv Eikon database and the sample firms’ remuneration reports.

Findings

The findings of this paper show that embedding sustainability in executive compensation positively affects firms’ non-financial performance. The results of this paper also reveal that specific corporate governance features can improve the impact of sustainability on non-financial performance.

Research limitations/implications

This analysis is limited to Italian firms included in the Financial Times Milan Stock Exchange Index; however, the findings are highly significant.

Practical implications

The findings provide regulators with useful insights for considering the integration of sustainability goals into executive remuneration. Another implication is that policymakers should require – at least – listed firms to fulfil specific corporate governance structural requirements. Finally, the findings can provide investors and financial analysts with a greater awareness of the role played by executive remuneration in the long-term value-creation process.

Originality/value

This paper contributes to addressing the relationship among sustainability, remuneration and non-financial disclosure, drawing on the stakeholder–agency theoretical framework and focusing on Italian firms. This issue has received limited attention with controversial results in the literature.

Details

Meditari Accountancy Research, vol. 31 no. 7
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 4 August 2020

Lawrence Musiitwa Kyazze, Isa Nsereko and Isaac Nkote

The purpose of this paper is to examine the relationship between cooperative practices of accountability, cooperative ownership, advanced communication and non-financial

Abstract

Purpose

The purpose of this paper is to examine the relationship between cooperative practices of accountability, cooperative ownership, advanced communication and non-financial performance in savings and credit cooperative societies.

Design/methodology/approach

The study uses a cross-sectional research design and adopted a mixed methodological approach were hypotheses were statistically tested using structural equation modeling based on survey data (n = 220) and narratives from qualitative findings supported the quantitative findings from savings and credit cooperative societies.

Findings

The findings reveal that cooperative practices of accountability, cooperative ownership and advanced communication are significantly and positively associated with non-financial performance of savings and credit cooperative societies.

Originality/value

This study provides empirical evidence on the relationship between cooperative practices of accountability, cooperative ownership and advanced communication and non-financial performance in savings and credit cooperative societies in emerging economies like Uganda. To the best of the authors’ knowledge, there is limited or no study that has used the construct of agency theory in explaining the relationship between cooperative practices and non-financial performance in savings and credit cooperative societies.

Details

International Journal of Ethics and Systems, vol. 36 no. 3
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 7 April 2015

Chong M. Lau

The purpose of this paper is to ascertain if it is procedural fairness, or role clarity, or both procedural fairness and role clarity that mediate the relationship between…

1564

Abstract

Purpose

The purpose of this paper is to ascertain if it is procedural fairness, or role clarity, or both procedural fairness and role clarity that mediate the relationship between non-financial measures and managerial performance. Role clarity and procedural fairness may mediate the relationship between performance measures and managerial performance.

Design/methodology/approach

A survey questionnaire was used to collect the required data. The sample was drawn from 149 managers from 103 large manufacturing organisations located in the UK. The data were analysed by structural equation modelling.

Findings

The results indicate that it is role clarity that significantly mediates the relationship between non-financial measures and managerial performance. Surprisingly, procedural fairness has no significant mediating effect on the relationship.

Originality/value

To date, no prior studies have investigated systematically the effects of non-financial measures as well as the mechanism by which non-financial measures influence role clarity, procedural fairness and managerial performance. This study contributes by incorporating both procedural fairness and role clarity within an integrated model. This assists the research to ascertain precisely which variable (procedural fairness or role clarity) mediates the relationship between non-financial measures and managerial performance as well as the relative strengths of the two mediating variables.

Details

Pacific Accounting Review, vol. 27 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Open Access
Article
Publication date: 12 November 2021

Makoto Kuroki and Katsuhiro Motokawa

This study aims to provide evidence of how budget officers use non-financial and accrual-based cost information in the budgeting process and how the usage of this information is…

4987

Abstract

Purpose

This study aims to provide evidence of how budget officers use non-financial and accrual-based cost information in the budgeting process and how the usage of this information is influenced by financial constraints.

Design/methodology/approach

A randomized survey-based field experiment investigating budget officers in 546 Japanese local governments (LGs) was conducted. This allowed us to identify the budget officers' decision-making in the public sector budgeting process by creating and analyzing primary data with regression models.

Findings

We found that budget officers suppress budget amounts based on non-financial information of good performances. Under fiscal constraints, officers further reduce budget amounts using information on high accrual-based costs and poor non-financial performance.

Originality/value

Our survey-based field experiment allowed us to obtain primary data from officers making budget decisions. To the best of our knowledge, this study provides the first evidence that non-financial good and poor performance information and accrual-based cost information affect budget officers' decision-making under financial constrain.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 34 no. 6
Type: Research Article
ISSN: 1096-3367

Keywords

Article
Publication date: 1 August 2003

Mostaque Hussain

A number of Management Accounting (MA) researches have demonstrated the shortcomings of traditional accounting‐based performance measures for today’s uncertain Economic Conditions…

1309

Abstract

A number of Management Accounting (MA) researches have demonstrated the shortcomings of traditional accounting‐based performance measures for today’s uncertain Economic Conditions (EC) in technologically advancement competitive environments. The MA literature suggests the impact of economic pressures on MA practices, though there are different notions regarding the impact of EC on Non‐financial Performance Measurement (NFPM). Some researchers argue that management needs an interactive information system in more volatile and uncertain EC, and accordingly, the mode of the use of financial performance measures is greater in uncertain EC. However, some welldocumented predictions about the relationship of the external environmental, viz a viz uncertain economic environments, with the need of managers’ financial and nonfinancial information. Taking these aspects into account, it is important to consider the effect of EC on MA performance measures and their degree of responsiveness and adaptability to particular circumstances. Thus, this research made an attempt to study the impinge of EC on NFPM in Banks/Financial Institutions (BFI). The multiple case study approach, especially the study of different kinds of BFI in different macro environments, provides an opportunity to examine the effect of NFPM in different environments. The cross‐country studies help to demonstrate the rationale for the impact of EC on NFPM in three countries (Finland, Sweden and Japan). Results of this study anticipate that the uncertainty of EC increase pressures on management to improve and measure financial performance in order to survive in the hostile EC. To the contrary, managers would improve as well as measure non‐financial performance in the organizations.

Details

Managerial Finance, vol. 29 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 January 2021

Mahdi Salehi and Arash Arianpoor

The study's main objective is to identify business sustainability performance indicators and analyze the mutual relationship between different business sustainability components…

1107

Abstract

Purpose

The study's main objective is to identify business sustainability performance indicators and analyze the mutual relationship between different business sustainability components in Iran.

Design/methodology/approach

To achieve research objectives, the 125 indicators of Business Sustainability Performance in Arianpoor and Salehi (2020) were used. For data collection, a questionnaire is designed and developed. Moreover, the Delphi method is used to determine the indicators related to business sustainability performance. Accordingly, we attempted to send the questionnaire to 346 experts and qualified opinion-leaders in the study area to utilize their opinions in our project. Finally, 108 questionnaires were analyzed statistically.

Findings

In this study, the confirmatory factor analysis (CFA), binomial test, one sample t-test, one sample Kolmogorov–Smirnov test and Kruskal–Wallis test are used. The results of statistical tests show that among 125 proposed indicators, 11 indicators were eliminated. Hence, to assess business sustainability performance in the listed firm on the Tehran Stock Exchange, 114 indicators were analyzed. To achieve the study's objective, the relationship between financial and non-financial sustainability performance and their effect is analyzed using the Smart PLS Software. Findings indicate that there is a mutual relationship between financial and non-financial sustainability performance in Iran. There is also a relationship between the operational component and research component and non-financial sustainability performance. In contrast, as for the growth component and non-financial sustainability performance, there is no significant relationship. Also, root means squared error (RMSE) values suggest a reasonable model-data fit.

Originality/value

The type and characteristics of different regions have a significant role in the reporting and differ according to different economic conditions. The discussion of business sustainability and its reporting is important; therefore, essential indicators were identified in this study. In addition, all aspects of sustainability performance are considered cohesively to analyze the mutual relationship between different components of sustainability performance and to be able to make more appropriate decisions in future studies about performance evaluation and reporting using the results of this paper.

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 non-financial

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.

Book part
Publication date: 10 December 2005

Alan S. Dunk

Issues relating to the financial and non-financial performance of firms are attracting considerable research attention. Four specific factors are focused on this paper, namely…

Abstract

Issues relating to the financial and non-financial performance of firms are attracting considerable research attention. Four specific factors are focused on this paper, namely quality of information system (IS) information, corporate environmental integration, product innovation, and product quality to investigate the extent to which these variables influence financial and non-financial performance. All four independent variables were found to enhance the performance assessed in non-financial terms. In contrast, the results show that product innovation alone influences financial performance. The findings of this study suggest that the efficacy of these factors may be more effectively assessed by evaluating their impact on performance measured in non-financial terms, thereby suggesting that the inclusion of non-financial measures in performance evaluation models should enhance control system functioning.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-0-76231-243-6

Open Access
Article
Publication date: 22 May 2023

P.K. Nandram, A.J. Brouwer and H.P.A.J. Langendijk

This paper aims to investigate whether managers use impression management through the presentation of non-financial information in an integrated reporting setting.

3016

Abstract

Purpose

This paper aims to investigate whether managers use impression management through the presentation of non-financial information in an integrated reporting setting.

Design/methodology/approach

The authors performed an experiment with experienced professional controllers and part-time students enrolled in the executive master’s degree in finance and control at universities in the Netherlands. In this experiment, we manipulated the financial performance to test if managers present non-financial information differently based on the firm’s financial performance.

Findings

This study found that impression management is not applied by including or excluding non-financial key performance indicators (KPIs) in the integrated report, but by using more prominent presentation forms for positive non-financial performance and non-prominent ones for negative non-financial performance. However, the use of impression management through the presentation form decreased when the firms’ financial performance was positive. In that instance, this study noted that managers statistically significantly more often decided to present poor non-financial performance in a prominent presentation format in comparison to managers who were not aware of the financial performance.

Research limitations/implications

A limitation of this paper is that the authors focused on only two impression management strategies: opportunistic/under-reporting and the presentation form. This analysis shows that the use of impression management mainly seems to occur through the presentation format. Future research could investigate other impression management strategies in an integrated reporting setting.

Practical implications

The results of this study are of importance for users of integrated reports, because it will provide more insight into whether firms are truly transparent in their integrated reports. Furthermore, the theoretical implication of this study is relevant to regulatory authorities, because it sheds light on the different forms of impression management used in integrated reporting and the influence of positively or negatively performing KPIs on the decisions of preparers of integrated reports.

Originality/value

Therefore, in this study, the authors add to prior literature by investigating the concept of impression management in an integrated reporting setting. More specifically, the authors perform an experiment and focus on different forms of impression management (the presentation format and under-reporting) through non-financial KPIs in an integrated reporting setting and link it to firm financial performance.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Content available
Article
Publication date: 11 October 2021

MyoJung Cho and Salma Ibrahim

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…

1139

Abstract

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.

Details

Journal of Financial Reporting and Accounting, vol. 20 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

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