An Empirical Investigation of the Performance Consequences of Nonfinancial Measures

Posted: 5 May 2005 Last revised: 2 Jan 2013

See all articles by Amal A. Said

Amal A. Said

Northern Kentucky University

Hassan R. Hassabelnaby

University of Toledo - Department of Accounting

Benson Wier

Virginia Commonwealth University

Date Written: January 1, 2013

Abstract

Firms are increasingly implementing new performance measurement systems to track nonfinancial metrics such as customer and employee satisfaction, quality, market share, productivity, and innovation. This study examines the implications of nonfinancial performance measures included in compensation contracts on current and future performance. Contextual factors, environmental factors, and strategic plans vary across firms, and, in turn, adopting appropriate nonfinancial measures determine the performance consequences of such measures. Our findings support the contention that firms that employ a combination of financial and nonfinancial performance measures have significantly higher mean levels of returns on assets and higher levels of market returns. Although we find evidence that the adoption of nonfinancial measures improves firms' current and future stock market performance, we only find partial support for accounting performance improvements. Overall, the results indicate that the association between the use of nonfinancial measures and firm performance is contingent on the firm's operational and competitive characteristics.

Keywords: Non-financial performance measures, Firm characteristics, Compensation contract, Firm performance, Contingency theory

Suggested Citation

Said, Amal A. and Hassabelnaby, Hassan R. and Wier, Benson, An Empirical Investigation of the Performance Consequences of Nonfinancial Measures (January 1, 2013). Journal of Management Accounting Reserach, Vol 15, pp. 193-224, 2003. Available at SSRN: https://ssrn.com/abstract=713561

Amal A. Said (Contact Author)

Northern Kentucky University ( email )

Nunn Drive
Highland Heights, KY 41099
United States
859.572.5499 (Phone)

Hassan R. Hassabelnaby

University of Toledo - Department of Accounting ( email )

Toledo, OH 43606
United States

Benson Wier

Virginia Commonwealth University ( email )

School of Business 301 W. Main St.
Richmond, VA 23284
United States
804-828-7162 (Phone)
804-828-8884 (Fax)

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