An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures

Accounting Review - Tập 75 Số 1 - Trang 65-92 - 2000
Rajiv D. Banker1, Gordon Potter2, Dhinu Srinivasan3
1University of Texas at Dallas
2(Cornell University
3University of Pittsburgh

Tóm tắt

Recent studies report an increasing use of nonfinancial measures such as product quality, customer satisfaction, and market share in performance measurement and compensation systems. A growing literature suggests that because current nonfinancial measures are better predictors of long-term financial performance than current financial measures, they help refocus managers on the long-term aspects of their actions. However, little empirical evidence is available on the relation between nonfinancial measures and financial performance, and even less is known about performance impacts of incorporating nonfinancial measures in incentive contracts. Using time-series data for 72 months from 18 hotels managed by a hospitality firm, this study provides empirical evidence on the behavior of nonfinancial measures and their impact on firm performance. The results indicate that nonfinancial measures of customer satisfaction are significantly associated with future financial performance and contain additional information not reflected in the past financial measures. Furthermore, both nonfinancial and financial performance improve following the implementation of an incentive plan that includes nonfinancial performance measures.

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Accounting Review

Tập 75 Số 1

65-92

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