Performance Measures and Short-Termism: An Exploratory Study

52 Pages Posted: 27 Mar 2012

See all articles by David Marginson

David Marginson

Cardiff University

Laurie McAulay

Loughborough University

Melvin Roush

Pittsburg State University; Victoria University of Wellington - Te Herenga Waka - School of Accounting and Commercial Law

Tony van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration

Date Written: February 2009

Abstract

We examine the relationship between performance measurement systems and short-termism. Hypotheses are tested on a sample of senior managers drawn from a major telecommunications company to determine the extent to which the diagnostic and interactive uses of financial and non-financial measures give rise to short-termism. We find no evidence to suggest that the use of financial measures, either diagnostically or interactively, leads to short-term behaviour. In contrast, we find a significant association between the use of non-financial measures and short-termism. Results suggest that the diagnostic use of non-financial measures leads managers to make inter-temporal trade-off choices that prioritise the short term to the detriment of the long term, while we find interactive use is negatively associated with short-termism. We find an imbalance in favour of the diagnostic use over the interactive use of non-financial performance measures is associated with short-termism. Overall, findings highlight the importance of considering the specific use of performance measures in determining the causes of short-termism.

Keywords: financial measures, non-financial measures, diagnostic control, interactive control, short-termism

Suggested Citation

Marginson, David and McAulay, Laurie and Roush, Melvin and van Zijl, Tony, Performance Measures and Short-Termism: An Exploratory Study (February 2009). Available at SSRN: https://ssrn.com/abstract=2028761 or http://dx.doi.org/10.2139/ssrn.2028761

David Marginson

Cardiff University ( email )

Cardiff CF10 3EU
United Kingdom
+ 44 (0) 29 2087 6954 (Phone)
+ 44 (0) 29 2087 4419 (Fax)

HOME PAGE: http://www.cardiff.ac.uk/carbs/staff/staff.html#m

Laurie McAulay

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

Melvin Roush

Pittsburg State University ( email )

1701 S. Broadway
Pittsburg, KS 66762
United States

Victoria University of Wellington - Te Herenga Waka - School of Accounting and Commercial Law ( email )

Faculty of Commerce and Administration
PO Box 600
Wellington
New Zealand
64 4 471 5365 (Phone)
64 4 495 5076 (Fax)

Tony Van Zijl (Contact Author)

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

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