An exploratory study of relative and incremental information content of two non-financial performance measures: Field study evidence on absence frequency and on-time delivery

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Abstract

In this exploratory field study, I test the relative and incremental information content of two non-financial performance measures compared to financial performance measures for future financial performance. The proprietary database used is from the contracts of the managers of 27 responsibility centers of a large Dutch service firm. Three years of monthly observations are used for the analysis. The accounting literature is ambiguous about whether non-financial measures have relative or incremental information content, or both, beyond lagged financial measures for future financial performance. Although it is often stated that non-financial performance measures are better indicators for future financial performance than lagged financial performance, the empirical accounting research evaluates the incremental contribution of non-financial measures beyond lagged financial measures. I find that in my research context the two non-financial measures absence frequency and on-time delivery do not have more relative information content than lagged financial measures. However, the non-financial measures have incremental information content beyond the lagged financial measures for both future costs and future revenues. In addition, the individual non-financial measures have different lags for costs and revenues. © 2006 Elsevier Ltd. All rights reserved.
Original languageEnglish
Pages (from-to)249-265
JournalAccounting, Organizations and Society
Volume33
Issue number2-3
DOIs
Publication statusPublished - 2008

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