Non‐financial management accounting measures in Finnish financial institutions

Abstract

The importance of the role of management accounting (MA) in measuring emerging non‐financial performance (NFP) is increasing, especially in the service sector. However, there are a number of studies concerning NFP measures, but comparatively little is known about non‐financial MA measures in services and almost nothing in banks/financial institutions (BFI). Taking into consideration the need for studying MA practices in measuring emerging NFP in the service industry, an attempt has been made in this paper to investigate the practice of MA in NFP measurement in Finnish BFI. Several factors have been identified, in the context of “New Institutional Sociology” theory that influence NFP measures, of which economic impact is the most influential, followed, subsequently by coercive, normative and mimetic pressures. Accordingly, the empirical findings of this research are evaluated, and consequently, it has been used to modify the theory for further research that fits with the dynamic nature of NFP in the financial industry.

Understanding environmental management accounting (EMA) adoption: a new institutional sociology perspective

“…A similar study by Hussain and Gunasekaran (2002) investigated the practice of non-financial performance measurement in Finnish banks and financial institutions. Hussain and Gunasekaran (2002) linked coercive pressure, normative influences, and mimetic factors to non-financial performance measurement in Finnish banks and financial institutions.…”

“…Past studies have often established management accounting as an organisational device shaped by the organisation's important stakeholders (Brignall and Modell, 2000;Lapsley and Pallot, 2000;Hussain and Hoque, 2002;Hussain and Gunasekaran, 2002;Sila, 2007;Martinez-Costa et al, 2008). Brignall and Modell (2000) identified funding bodies, professional service providers and purchasers of public services as the three main stakeholders influencing the implementation of multidimensional performance measurement in a public sector organisation.…”

“…Hussain and Gunasekaran (2002) linked coercive pressure, normative influences, and mimetic factors to non-financial performance measurement in Finnish banks and financial institutions. Among the three mechanisms, coercive pressure from the Central Bank and socioeconomic and political institutions was found to be the most influential, followed by normative influences and mimetic factors.…”

“…Accordingly, prior studies on organisations have linked the adoption of contemporary management accounting practices such as activity-based costing (ABC) (Arnaboldi and Lapsley, 2003), non-financial performance measurement (Hussain and Gunasekaran, 2002;Hussain and Hoque, 2002), total quality management (TQM; Sila, 2007;Martinez-Costa et al, 2008) and ISO 9000 certification (Martinez-Costa et al, 2008) to institutional pressure.…”

“…Among the three mechanisms, coercive pressure from the Central Bank and socioeconomic and political institutions was found to be the most influential, followed by normative influences and mimetic factors. Normative influences include management's competence and strategic orientation, while mimetic factors concern pressure to integrate management accounting systems with strategic priorities and copying best practice of performance measurement systems from similar organisations (Hussain and Gunasekaran, 2002).…”