[How could the balanced-Scorecard Improves Financial-Reporting]

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Abstract

In this quasi-experimental study, we investigate whether bank branches implementing the Balanced-Scorecard (BSC) outperform bank branches within the same banking organization on key financial measures. Although the BSC has gained popularity among managers as a performance measurement tool, little empirical evidence exists to substantiate claims that the BSC promotes superior performance regarding financial aspects when compared to a traditional performance measurement system. We find evidence of superior performance regarding financial aspects for branches implementing the BSC when compared to non-BSC implementing branches.

Balanced-Scorecard Improves Financial-Reporting

Chapter I: Introduction

Purpose of the Study

The purpose of this paper is to investigate the effectiveness of the Balanced-Scorecard (BSC) in improving Financial-Reporting. The BSC has gained increasing popularity as an effective management tool that aligns employee actions & goals with corporate strategy since first being introduced in 1992. We present an empirical analysis that investigates the impact of BSC on a banking institution's Financial-Reporting.

History

Beginning in the early 1980, 10-100s, management accounting researchers described the increasing irrelevance of traditional control & performance measurement practices. The growing importance of service industries & increased global competition has further intensified the need for alternative control & performance measures.

The BSC arose out of the need to improve the planning, control, & performance measurement functions of management accounting. Because of the rise in popularity of the BSC, & benefits attributed to its usage, Atkinson et al. (1997 85) state the BSC is a significant development in management accounting that deserves intense research attention. They suggest using multiple research methods, including case studies, behavioral experiments, & archival approaches. Although much has been written extolling the benefits of the BSC, few studies exist that directly assess Financial-Reporting benefits associated with the BSC or claims the BSC is superior to other performance measurement systems. This study seeks to determine whether an improvement in Financial-Reporting occurred after implementing a BSC & whether the change in Financial-Reporting is significantly greater than performance observed in a similar setting where a traditional performance measurement system using only financial measures is employed.

To achieve & sustain improved Financial-Reporting are among the proposed benefits identified by BSC advocates, yet no study has established a strong causal link between BSC usage & improved Financial-Reporting. The data set is unique because we have a designed experiment setting (experimental & control groups with pre- & post-test data) in the context of a field study. Our study contributes to current literature by directly examining an actual BSC program & its ability to improve Financial-Reporting in an organization.

A primary tenet of the BSC is that success should be achieved on key non-financial measures (NFMs) prior to realizing success on key financial measures. Employing the BSC method aids managers in identifying those key KFMs that are linked to success on selected financial measures. Previous studies seeking to establish linkages between specific NFMs & improved operational & Financial-Reporting have mixed results. This study differs from these prior studies in four fundamental ways. Second, many studies relied on survey & archival research methods to obtain information about ...