Performance Implications of Strategic Performance Measurement in Financial Services Firms

61 Pages Posted: 12 May 2003

See all articles by Christopher D. Ittner

Christopher D. Ittner

University of Pennsylvania - Accounting Department

David F. Larcker

Stanford University - Graduate School of Business

Taylor Randall

University of Utah - School of Accounting and Information Systems

Date Written: March 2003

Abstract

This study examines the relation between measurement system satisfaction, economic performance, and two general approaches to strategic performance measurement: greater measurement diversity and improved alignment with firm strategy and value drivers. We find consistent evidence that firms making more extensive use of a broad set of financial and (particularly) non-financial measures than firms with similar strategies or value drivers have higher measurement system satisfaction and stock market returns. However, we find little support for the alignment hypothesis that more or less extensive measurement than predicted by the firm's strategy or value drivers adversely affect performance. Instead, our results indicate that greater measurement emphasis and diversity than predicted by our benchmark model is associated with higher satisfaction and stock market performance. Our results also suggest that greater measurement diversity relative to firms with similar value drivers has a stronger relationship with stock market performance than greater measurement on an absolute scale. Finally, the balanced scorecard process, economic value measurement, and causal business modeling are associated with higher measurement system satisfaction, but exhibit almost no association with economic performance.

Keywords: balanced scorecard, strategic performance measurement, non-financial performance measurement

Suggested Citation

Ittner, Christopher D. and Larcker, David F. and Randall, Taylor, Performance Implications of Strategic Performance Measurement in Financial Services Firms (March 2003). Available at SSRN: https://ssrn.com/abstract=395824 or http://dx.doi.org/10.2139/ssrn.395824

Christopher D. Ittner (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7786 (Phone)
215-573-2054 (Fax)

David F. Larcker

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Taylor Randall

University of Utah - School of Accounting and Information Systems ( email )

1645 Campus Center Drive
Salt Lake City, UT 84112
United States

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