MARKET COMPETITION,COMPUTER-AIDED MANUFACTURING AND USE OF MULTIPLE PERFORMANCE MEASURES: AN EMPIRICAL STUDY

This paper reports the results of an empirical investigation into use of multiple measures of performance in manufacturing organisations. More specifically, it examines how a multiple performance measurement system is associated with the intensity of market competition and the application of computer-aided manufacturing processes. To test this association, data were collected from 71 New Zealand-based manufacturing units. The results suggest that greater emphasis on multiple measures for performance evaluation is associated with businesses facing high competition and making greater use of computer-aided manufacturing processes.     

Customer-focused manufacturing strategy and the use of operations-based non-financial performance measures: A research note

This note follows and extends Abernethy and Lillis (Accounting, Organizations and Society, 1995) by examining: (i) whether firms which maintain a customer-focused manufacturing strategy also maintain an emphasis on non-financial (operations-based) measures in their performance measurement systems; and (ii) whether such an emphasis is associated with enhanced performance for those firms. Data are obtained via questionnaire survey of a random sample of manufacturing firms in Sydney, Australia. Support is found for the hypothesized association between customer-focus strategy and the use of non-financial performance measures (and hence for Abernethy and Lillis) but not for the link to organizational performance.     

Does IT investment improve bank performance? Evidence from Europe

This paper investigates whether investment in information technology (IT) – hardware, software and other IT services – influences the performance of banks. Using a sample of 737 European banks over the period 1995–2000 we analyse whether IT investment is reflected in improved performance (measured using both standard accounting ratios and cost and alternative profit efficiency measures). Despite banks being major investors in IT we find little relationship between total IT investment and improved bank profitability or efficiency indicating the existence of a profitability paradox. However, the impact of different types of IT investment (hardware, software and services) on banks’ performance is heterogeneous. Investment in IT services from external providers (consulting services, implementation services, training and education, support services) appears to have a positive influence on accounting profits and profit efficiency, while the acquisition of hardware and software seems to reduce banks’ performance.     

基于Panel Data模型的我国商业银行效率研究

从盈利能力、资产流动性和费用控制等方面研究我国商业银行效率,为消除原始变量之间的多重共线性,运用主成分分析方法对原始变量进行变换,得到盈利性因子和流动性及安全性因子作为解释变量。运用固定影响的变截距Panel Data模型对国内13家主要商业银行1999～2008年的效率进行实证分析表明:国有商业银行在盈利能力方面对效率的贡献要高于股份制商业银行,但在费用控制和资产质量等方面对效率的贡献要低于股份制商业银行。     

M&A Operations and Performance in Banking

This paper investigates whether M&A operations influence the performance of banks. Using a sample of 714 deals involving EU acquirers and targets located throughout the world over the period 1991–2005, we investigate whether M&A operations are associated with improved performance (using both standard accounting ratios and cost and alternative profit X-efficiency measures). Despite the extensive and ongoing consolidation process in the banking industry, we find that M&A operations are associated with a slight deterioration in return on equity, cash flow return and profit efficiency and with a marked improvement in cost efficiency. Hence, the improvements in cost efficiency appear to be transferred to bank clients. These changes in performance are directly attributable to the M&A operations, and would not have occurred in their absence. Moreover, these changes exhibit a particularly negative trend for cross-border deals to testify the importance of geographical relatedness in order to achieve better post-M&A performance. The environmental and bank-characteristics that make a deal successful or unsuccessful are finally identified.     

Differences in strategy, quality management practices and performance reporting systems between ISO accredited and non-ISO accredited companies

In recent years, an increasing number of organizations are obtaining accreditation offered by the International Organization for Standardization (ISO). Although ISO accreditation may reflect an organization's pursuit of a quality-focused business strategy and a commitment to quality management practices, ISO accreditation may merely be a response to external (customers') demands for quality certification. This study investigates whether ISO accredited companies differ from non-ISO accredited companies in business strategy and in their implementation of quality management practices. It also investigates differences between ISO accredited and non-ISO accredited companies in their reporting of quality in physical and financial terms and traditional performance measures. Based on a mail questionnaire sent to a sample of ISO and non-ISO accredited New Zealand manufacturing companies, the results showed a significant difference in the business strategy pursued by the two groups, with ISO accredited companies regarding quality as more important than cost efficiencies. However, there was no significant difference in the quality management practices of ISO accredited and non-ISO accredited companies, except in the areas of process improvement and quality measurement. There was also little evidence of differences in performance reporting systems between ISO accredited and non-ISO accredited companies.     

The association between ISO 9000 certification and financial performance

This study explores the association between ISO 9000 certification and financial performance at the organizational level in a mature quality initiative market. It extends the limited literature on quality initiatives and objective measures of financial performance. The study hypothesizes that ISO 9000 certification is associated with improvements across three dimensions of financial performance. These dimensions are operating efficiency, growth in sales, and overall financial performance. These dimensions of performance are measured using profit margin, growth in sales, and earnings per share, respectively. Based on data for a sample of 70 companies listed on the Singapore Stock Exchange over a 6-year period, the results of the study are consistent with the hypothesized effects. In particular, the results show that the extent of improvement is driven largely by operating efficiencies and suggests that firms can benefit from ISO 9000 certification if they are genuinely interested in the quality philosophy by improving their internal business processes.     

SPECIFIC KNOWLEDGE AND DIVISIONAL PERFORMANCE MEASUREMENT

This paper discusses five common divisional performance measurement methods—cost centers, revenue centers, profit centers, investment centers, and expense centers—and provides the beginnings of a theory that attempts to explain when each of these five methods is likely to be the most efficient. The central insight of the theory is that each of these methods offers an alternative way of aligning decision-making authority with valuable "specific knowledge" inside the organization.
The theory suggests that cost and revenue centers work best in cases where headquarters has good information about cost and demand functions, product quality, and optimal output mix. Profit centers—defined as business units whose managers have responsibility for overall profits, but not the authority to make major capital spending decisions—tend to supplant revenue and cost centers when the line managers have a significant informational advantage over headquarters and when there are few interdependencies (or "synergies") between divisions. Investment centers—that is, profit centers in which unit managers are allowed to make major investment decisions—tend to prevail when the activity is capital-intensive and when it is difficult for headquarters to identify the value-maximizing investment strategy.
In evaluating the performance of profit centers, rate-of-return performance measures like RONA (return on net assets) are likely to be effective when unit managers have little influence over the level of new investment. But, in the case of investment centers, Economic Value Added, or EVA, is likely to be the most effective single-period measure of performance because it is best designed to encourage value-maximizing investment decisions.     

Strategy, performance-measurement systems, and performance: A study of Chinese firms

Numerous studies in developed Western countries have shown that firms' strategic choices are responsive to attributes of their external environment. In turn, performance-measurement systems are used to support strategy implementation, which then affect firm performance. However, institutional factors may limit the extent to which these linkages exist in the transitional Chinese economy. We analyze survey and publicly available data for 104 listed Chinese manufacturing firms and find that, despite a number of identifiable impediments, these firms' strategic emphasis on growth is responsive to the competition and uncertainty that they face. In the case of uncertainty, the relationship goes in the opposite direction to that found in Western firms. Like their Western counterparts, Chinese firms with greater emphasis on growth also tend to make greater use of balanced/integrated performance measurement systems, and, in turn, they perform at a higher level.     

劳动力成本与利润差异对制造业升级的影响研究

引入单位劳动力成本和人均利润,考量劳动力成本与利润影响制造业升级的效应。结果表明：样本期间内虽然劳动力成本快速上涨,但劳动生产率增速更快,制造业整体单位劳动力成本没有上升,且有小幅下降,劳动密集型制造业仍有一定综合成本优势,但其人均利润低于制造业整体水平,比重总体下降,发展后劲不足,须转型升级;资本密集型虽然利润率相对较低,但人均利润为最高,比重不断上升,仍应是当前发展的重点;技术密集型比较优势不明显,急需突破核心技术,提高综合国际竞争力。     

Trademarking status and economic efficiency among commercial banks: Some evidence for the UK

As competition in the banking sector has intensified over the last two decades, commercial banks have started to use trademarks to differentiate their products and services from those offered by their competitors. Less clear are the implications of the trademarking activities on the commercial banks’ performance. In this paper, we compare the cost and profit efficiency of trademarking and non-trademarking banks in the UK, over the period 2001–2013 using stochastic frontier methods. We use Propensity Score Matching techniques to identify a sample of non-trademarking banks which share the same characteristics as the trademarking banks to ensure that variations in the efficiency between the commercial banks in our sample can be attributed to their trademarking status only. We then explicitly test the hypothesis that trademarking and non-trademarking banks share the same cost and profit frontiers. We cannot reject the hypothesis of a common cost and profit frontier. We also find that trademarking banks tend to be more profit efficient than non-trademarking banks while there is no significant difference between the cost efficiency scores of trademarking and non-trademarking banks.     

基于行为金融学的行为投资分析方法

行为金融学是应用心理学、行为学的理论和方法分析、研究金融行为及现象的一门新兴交叉学科。运用行为金融理论分析、判断和解释现实的证券市场运行,可以明显地看到,其基本特征表现为无效性,或者说市场是以低效率方式运行的。行为投资分析方法从投资者的各种行为偏差出发,采取一系列的积极交易和管理策略,包括成本平均策略、时间分散化策略、反向投资策略、动量交易策略及设立“止损点”的交易策略等。行为投资分析法力图以较低的成本和风险获取较高收益,具有重大的实践意义。     

Specific Knowledge and Divisional Performance Measurement

This classic by the formulators of agency cost theory discusses five common divisional performance measurement methods—cost centers, revenue centers, profit centers, investment centers, and expense centers—while providing a theory that attempts to explain when each of these methods is likely to be the most efficient. The central insight of the theory is that each method offers a different way of aligning decision-making authority with valuable "specific knowledge" inside the organization.
The theory suggests that cost and revenue centers work best in cases where headquarters has good information about cost and demand functions, product quality, and optimal output mix. Profit centers—defined as business units whose managers have responsibility for overall profits, but not the authority to make major capital spending decisions—tend to supplant revenue and cost centers when line managers have a significant informational advantage over headquarters and when there are few interdependencies (or "synergies") between divisions. Investment centers—profit centers in which unit managers are allowed to make major investment decisions—tend to prevail when the activity is capital-intensive and when it is difficult for headquarters to identify the value-maximizing investment strategy.
In evaluating the performance of profit centers, rate-of-return measures like ROA are likely to be effective when unit managers do not have major influence over the level of new investment. But, in the case of investment centers, Economic Value Added, or EVA, is likely to be the most effective single-period measure because it is designed to encourage only value-increasing investment decisions.     

Factors influencing the role of management accounting in the development of performance measures within organizational change programs

Many companies are undergoing organizational changes encompassing innovative approaches to organizing production processes, restructuring work practices and developing new planning and control mechanisms. This paper explores the role that management accounting played in the development of performance measurement systems within five organizations implementing change programs. The major case study is of a large manufacturing firm undertaking changes which included the development of team structures, the adoption of a customer-focused strategy and the implementation of new performance measurement systems. In this company, a lack of integration of operational performance measures with strategic priorities contributed to poor integration of team activities with overall strategy. The paper proposes five interrelated factors that may help explain the extent to which management accountants contribute to the development of integrated performance measures and change programs. Case evidence drawn from a further four firms is presented to provide some validation of conclusions drawn from the primary case study.     

Performance measures,consensus on strategy implementation,and performance: Evidence from the operational-level of organizations

In this article, we examine how consensus between operational-level managers and employees on strategy implementation affects the effectiveness of performance measures and employee performance. We use field-based surveys and proprietary archival data from a Taiwanese financial services company to answer our research questions. Consistent with the predictions of person–organization fit theory, we find that consensus on the implementation of the customer-oriented strategy is positively associated with frontline employees’ performance. Our results also indicate that the incentive effect of using performance measures in performance evaluation and promotion is stronger for employees with a higher level of consensus. Our findings suggest that consensus is critical to the success of an organization’s strategy implementation and the effectiveness of performance measures.     

Management accounting and control practices in a lean manufacturing environment

A lean strategy is rapidly becoming the dominant paradigm in manufacturing. Kennedy and Widener (2008) use a case study to develop a theoretical framework of management accounting and control practices for firms following a lean manufacturing strategy. We build on Kennedy and Widener (2008) by examining a structural equation model that provides evidence on the extent to which a lean manufacturing implementation is related to five management accounting and control practices. Using survey data from 244 US companies with an interest in lean manufacturing, we find a direct positive relation between the extent of a lean manufacturing implementation and a simplified strategic reporting system, value stream costing, visual performance measurement information, and employee empowerment. We find a direct negative relation with inventory tracking; however, we find it is conditional on the extent of top management support for change in production strategies such that firms decrease reliance on inventory tracking in the presence of strong management support. We also conclude that the management accounting and control practices work together as a package in a lean manufacturing environment as evidenced by the many direct associations among the five management accounting and control practices.     

Is cloud computing the digital solution to the future of banking?

This study investigates the impact of banks’ strategic move to cloud computing on bank performance and risk-taking. Based on a novel index of banks’ exposure to cloud computing, we find that banks’ adoption of cloud computing is associated with lower cost efficiency, higher profit efficiency, and greater operational risk using data on Chinese banks over the period 2008–2019. We also find that cloud computing interacts with other newly emerging technologies, leading to synergy gains in cost efficiency and operational risk control but with a substitutive effect on profit efficiency from blockchain. The findings are of timely policy importance and practical relevance for regulators, policy-makers, and bank managers.     

Efficiency and risk in commercial banking: empirical evidence from East Asian countries

This paper analyses the effects of off-balance sheet (OBS) activities and various types of risks on the cost and profit efficiencies of banks in seven East Asian countries between 2001 and 2008. Cost and profit efficiency scores are estimated using the data envelopment analysis approach. The results of this analysis are then used to identify the impact of OBS activities and risk exposures on cost and profit efficiencies using a Tobit regression. Bank insolvency risk (as measured by z-scores) is positively related to profit efficiency, while interest sensitivity, size, equity to total assets and OBS exposures all impact on cost efficiency. The analysis of the impact of input and output slacks illustrates that in around 1 in 5 cases banks’ cost efficiency can be improved by adjusting the former variables, whereas in only around 1 in 100 cases a similar outcome is possible for profit efficiency.     

Postmodern Corporate Finance

One of the core tenets of modern finance theory is that corporations create value by producing operating rates of return on capital that are greater than the cost of capital. “Postmodern” corporate finance, while reaffirming the importance of earning an adequate return on capital, also attempts to restore at least part of the traditional corporate emphasis on top-line growth that prevailed before the intense focus on returns by modern shareholder value advocates. One important reason for the heightened emphasis on growth in addition to returns is that most rate-of-return measures used by companies and investors are based on conservative accounting practices that make old assets look more profitable than new ones, thereby discouraging investments in growth. This article introduces a new return measure called “Gross Business Return” that, when evaluated against a Required Return framework that reflects the level of current stock prices, has a stronger correlation with how companies are valued by the stock market. Moreover, in reviewing historical returns over time for both the market and specific industries, the author's research suggests that the market appears to demand considerably lower current returns than those implied by traditional weighted average cost of capital (WACC) approaches. And to the extent corporate executives rely on WACC, they could be passing up valuable growth opportunities. To help evaluate tradeoffs between growth and return, the author introduces a cash-based measure of corporate economic profit called Residual Cash Earnings. Unlike most traditional return and economic profit measures, Residual Cash Earnings, when expressed as a percentage of sales, provides a way for corporate managers to identify growth opportunities that, while producing current returns lower than WACC, are likely to add value over a multi-year time horizon. These new measures and analytical tools are suitable for strategic planning, budgeting, resource allocation, performance measurement, and rewards. Consistent application of these principles across these management processes provides a framework for constantly rebalancing the emphasis on growth and return to adapt to changes in the economy, industry, and competitive landscape.     

The value of distorting overhead cost allocations in an agency setting

This paper shows a strict demand for suitably chosen inaccurate overhead cost allocations in an agency model in which a profit centre manager is in charge of production cost containment and pricing decisions. Given exogenous restrictions on the compensation scheme, the use of distorted overhead costs by transforming the performance measure into an ‘accounting profit’, helps calibrate incentives for the manager. The paper derives conditions for under- or overallocation of overhead costs to products. Generally, underallocation is preferable if the riskiness of quantity is strongly positively related with price and unit cost of a product, or if the product is relatively more price-sensitive.