IDEAS home Printed from https://ideas.repec.org/a/eee/bracre/v37y2005i4p389-413.html
   My bibliography  Save this article

Financial and nonfinancial performance measures: How do they affect job satisfaction?

Author

Listed:
  • Lau, Chong M.
  • Sholihin, Mahfud

Abstract

Recent interest on the use of nonfinancial measures (e.g. in the Balanced Scorecard) generally assumes that such measures are essential to overcome the inadequacies of financial measures. However, it remains unclear (1) if the behavioural effects of these nonfinancial measures are different from those of financial measures; and (2) whether these effects are influenced by the relative importance of nonfinancial measures vis-à-vis financial measures. This study hypothesises that the use of performance measures for performance evaluation will significantly affect managers' job satisfaction. However, these effects are indirect through the managers' perceptions of the fairness of these measures and the interpersonal trust these measures promote. Based on a sample of 70 managers, these expectations are supported by the results. More importantly, the results also suggest that (1) the process by which nonfinancial measures affect employee job satisfaction is not different from that of financial measures, and (2) the relative importance of nonfinancial measures vis-à-vis financial measures has no significant effect on employee job satisfaction. These results may have important theoretical and practical implications.

Suggested Citation

  • Lau, Chong M. & Sholihin, Mahfud, 2005. "Financial and nonfinancial performance measures: How do they affect job satisfaction?," The British Accounting Review, Elsevier, vol. 37(4), pages 389-413.
    • Handle: RePEc:eee:bracre:v:37:y:2005:i:4:p:389-413
    DOI: 10.1016/j.bar.2005.06.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0890838905000417
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bar.2005.06.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ittner, CD & Larcker, DF, 1998. "Are nonfinancial measures leading indicators of financial performance? An analysis of customer satisfaction," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 1-35.
    2. Otley, David & Pollanen, Raili M., 2000. "Budgetary criteria in performance evaluation: a critical appraisal using new evidence," Accounting, Organizations and Society, Elsevier, vol. 25(4-5), pages 483-496, May.
    3. Chong M. Lau & Christen Buckland, 2001. "Budgeting—the Role of Trust and Participation: A Research Note," Abacus, Accounting Foundation, University of Sydney, vol. 37(3), pages 369-388, October.
    4. Hopwood, Ag, 1972. "Empirical Study Of Role Of Accounting Data In Performance Evaluation," Journal of Accounting Research, Wiley Blackwell, vol. 10, pages 156-182.
    5. Ross, Andrew, 1994. "Trust as a moderator of the effect of performance evaluation style on job-related tension: A research note," Accounting, Organizations and Society, Elsevier, vol. 19(7), pages 629-635, October.
    6. Otley, Dt, 1978. "Budget Use And Managerial Performance," Journal of Accounting Research, Wiley Blackwell, vol. 16(1), pages 122-149.
    7. Libby, Theresa, 1999. "The influence of voice and explanation on performance in a participative budgeting setting," Accounting, Organizations and Society, Elsevier, vol. 24(2), pages 125-137, April.
    8. Harrison, Graeme L., 1992. "The cross-cultural generalizability of the relation between participation, budget emphasis and job related attitudes," Accounting, Organizations and Society, Elsevier, vol. 17(1), pages 1-15, January.
    9. Lau, Chong M. & Low, Liang C. & Eggleton, Ian R. C., 1995. "The impact of reliance on accounting performance measures on job-related tension and managerial performance: Additional evidence," Accounting, Organizations and Society, Elsevier, vol. 20(5), pages 359-381, July.
    10. Magner, Nace & Welker, Robert B. & Campbell, Terry L., 1995. "The interactive effect of budgetary participation and budget favorability on attitudes toward budgetary decision makers: A research note," Accounting, Organizations and Society, Elsevier, vol. 20(7-8), pages 611-618.
    11. Hopwood, Ag, 1972. "Empirical Study Of Role Of Accounting Data In Performance Evaluation - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 10, pages 189-193.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luft, Joan & Shields, Michael D., 2003. "Mapping management accounting: graphics and guidelines for theory-consistent empirical research," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 169-249.
    2. Hartmann, Frank G. H., 2000. "The appropriateness of RAPM: toward the further development of theory," Accounting, Organizations and Society, Elsevier, vol. 25(4-5), pages 451-482, May.
    3. Sholihin, Mahfud & Pike, Richard & Mangena, Musa & Li, Jing, 2011. "Goal-setting participation and goal commitment: Examining the mediating roles of procedural fairness and interpersonal trust in a UK financial services organisation," The British Accounting Review, Elsevier, vol. 43(2), pages 135-146.
    4. Chenhall, Robert H., 2003. "Management control systems design within its organizational context: findings from contingency-based research and directions for the future," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 127-168.
    5. Jan Noeverman & Bas A.S. Koene & Roger Williams, 2005. "Construct measurement of evaluative style: a review and proposal," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 2(1), pages 77-107, April.
    6. Klaus Derfuss, 2015. "Relating Context Variables to Participative Budgeting and Evaluative Use of Performance Measures: A Meta-analysis," Abacus, Accounting Foundation, University of Sydney, vol. 51(2), pages 238-278, June.
    7. Chong Lau & Christen Buckland, 2000. "Budget emphasis, participation, task difficulty and performance: the effect of diversity within culture," Accounting and Business Research, Taylor & Francis Journals, vol. 31(1), pages 37-55.
    8. Marco Giovanni Rizzo, 2014. "La relazione tra il livello di coinvolgimento nel processo di budget, il commitment verso gli obiettivi, la soddisfazione lavorativa e i relativi risvolti sulla performance manageriale. I risultati di," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2014(1), pages 9-34.
    9. Hartmann, Frank G. H. & Moers, Frank, 1999. "Testing contingency hypotheses in budgetary research: an evaluation of the use of moderated regression analysis," Accounting, Organizations and Society, Elsevier, vol. 24(4), pages 291-315, May.
    10. Tobias Johansson & Gabriella Wennblom, 2017. "In female supervisors male subordinates trust!? An experiment on supervisor and subordinate gender and the perceptions of tight control," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 28(3), pages 321-345, October.
    11. Dunk, Alan S., 2003. "Moderated regression, constructs and measurement in management accounting: a reflection," Accounting, Organizations and Society, Elsevier, vol. 28(7-8), pages 793-802.
    12. Staci A. Kenno & Michelle C. Lau & Barbara J. Sainty, 2018. "In Search of a Theory of Budgeting: A Literature Review," Accounting Perspectives, John Wiley & Sons, vol. 17(4), pages 507-553, December.
    13. Larissa Kyj & Robert J. Parker, 2008. "Antecedents of Budget Participation: Leadership Style, Information Asymmetry, and Evaluative Use of Budget," Abacus, Accounting Foundation, University of Sydney, vol. 44(4), pages 423-442, December.
    14. Williams, John J. & Seaman, Alfred E., 2001. "Predicting change in management accounting systems: national culture and industry effects," Accounting, Organizations and Society, Elsevier, vol. 26(4-5), pages 443-460.
    15. Van der Stede, Wim A. & Young, S. Mark & Chen, Clara Xiaoling, 2005. "Assessing the quality of evidence in empirical management accounting research: The case of survey studies," Accounting, Organizations and Society, Elsevier, vol. 30(7-8), pages 655-684.
    16. Prabhu Sivabalan & Peter Booth & Teemu Malmi & David A. Brown, 2009. "An exploratory study of operational reasons to budget," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 849-871, December.
    17. Chong Lau & Ian Eggleton, 2003. "The influence of information asymmetry and budget emphasis on the relationship between participation and slack," Accounting and Business Research, Taylor & Francis Journals, vol. 33(2), pages 91-104.
    18. Bhimani, Alnoor & Sivabalan, Prabhu & Soonawalla, Kazbi, 2018. "A study of the linkages between rolling budget forms, uncertainty and strategy," The British Accounting Review, Elsevier, vol. 50(3), pages 306-323.
    19. Marginson, David & Ogden, Stuart, 2005. "Coping with ambiguity through the budget: the positive effects of budgetary targets on managers' budgeting behaviours," Accounting, Organizations and Society, Elsevier, vol. 30(5), pages 435-456, July.
    20. Vagneur, K. & Peiperl, M., 2000. "Reconsidering performance evaluative style," Accounting, Organizations and Society, Elsevier, vol. 25(4-5), pages 511-525, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:bracre:v:37:y:2005:i:4:p:389-413. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-british-accounting-review .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.