Md. Mostaque Hussain

Understanding Non-Financial Performance Measurement practices in Japanese Banks: A New Institutional Sociology Perspective

This paper reports the performance measurement practices of four Japanese banks. The research is a field study informed by the new institutional sociology theory. It sought to understand and explain what factors affected the design and use of non‐financial performance measurement systems in the banks studied. The results indicate that several institutional forces influenced the banks to implement a particular performance measurement system. Of these, economic constraints appeared to be the most forceful factor, followed by the central bank’s regulatory control, accounting standards/financial legislation, management’s strategic focus, bank size, competition, and organizational tendency to copy best practices from others.

A paradigm of Islamic money and banking

Purpose – Theological perspectives in ethics, values and their functional application in the real world are vividly covered by the theory and practice of Islamic banking in recent times. This paper seeks to formalize the theological paradigm of the unity of God (Tawhid) and to make the groundwork of unity of knowledge in the context of the money, finance and real economy linkages. Design/methodology/approach – The paper combines narrative with argument and analysis. Findings – On the basis of this the structure of the balance sheet of Islamic banks with no interest rate as an ethical condition of Islamic financing is delineated. This topic is followed by a discussion on the experience of Islamic banks in recent times in the area of mobilizing resources and gaining profitability, popularity and stability by the Islamic financing methods and the direct mobilizing of financial resources into the real economy. In this way, the Islamic banks are shown to attain the much-needed complementary relations between social well-being for clients and financial efficiency for the banks. Originality/value – Adds insights to the theory and practice of Islamic banking.

An institutional perspective of non‐financial management accounting measures: a review of the financial services industry

The inadequacies of conventional management accounting (MA) systems increase the need of up‐to‐date MA information. However, critical non‐financial success factors are emerging in highly competitive technologically advanced business organisations, especially in the service sector with its increasing contribution to advanced economies and employment markets. As a result, the importance of the role of MA in measuring emerging non‐financial performance (NFP) is increasing in services, but comparatively little is known about non‐financial MA measures in services, and almost nothing in banks/financial institutions (BFI). This study attempts to review/investigate the practice of MA in NFP measurement of BFIs within the context of “new institutional sociology” theory and, consequently, to modify theory for further research that fits the dynamic nature of NFP in the financial services industry.

Activity‐based cost management in financial services industry

The rapid advancement of enormously expanding information technologies and vigorous global competition have caused the irrelevance of conventional management accounting systems (MAS) in providing useful information to assist management’s decision making, planning and control in both service and manufacturing organizations. The shortcomings of traditional MAS, in terms of validity, accuracy, completeness, consistency, understanding and relevance, increase the need for modern MAS, like activity‐based costing (ABC). In growing inadequacies of traditional MAS, ABC can be used as a tool for planning, control and decision making in service management. ABC traces costs to activities rather than products, which provides a more accurate and correct picture of the cost consumption. Furthermore, ABC uses a larger number of cost drivers instead of one or two volume‐based cost drivers in a traditional cost management. However, activity based management (ABM) helps management to make decisions and formulate plans to provide new services, improve existing services and measure performances in order to achieve overall competitive strategies advantages of organizations. Thus, this study attempts to demonstrate the shortcomings of traditional MAS, and the usefulness of ABC and ABM in making decisions on product profitability and performance measurement in services with a particular reference to the financial industry.

Non‐financial management accounting measures in Finnish financial institutions

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.

The impact of economic condition on management accounting performance measures: experience with banks

A number of Management Accounting (MA) researches have demonstrated the shortcomings of traditional accounting‐based performance measures for today’s uncertain Economic Conditions (EC) in technologically advancement competitive environments. The MA literature suggests the impact of economic pressures on MA practices, though there are different notions regarding the impact of EC on Non‐financial Performance Measurement (NFPM). Some researchers argue that management needs an interactive information system in more volatile and uncertain EC, and accordingly, the mode of the use of financial performance measures is greater in uncertain EC. However, some welldocumented predictions about the relationship of the external environmental, viz a viz uncertain economic environments, with the need of managers’ financial and nonfinancial information. Taking these aspects into account, it is important to consider the effect of EC on MA performance measures and their degree of responsiveness and adaptability to particular circumstances. Thus, this research made an attempt to study the impinge of EC on NFPM in Banks/Financial Institutions (BFI). The multiple case study approach, especially the study of different kinds of BFI in different macro environments, provides an opportunity to examine the effect of NFPM in different environments. The cross‐country studies help to demonstrate the rationale for the impact of EC on NFPM in three countries (Finland, Sweden and Japan). Results of this study anticipate that the uncertainty of EC increase pressures on management to improve and measure financial performance in order to survive in the hostile EC. To the contrary, managers would improve as well as measure non‐financial performance in the organizations.

The role of management accounting in corporate social responsibility measures: experience with the financial services industry

Recent management accounting (MA) studies demonstrate the need for multi-dimensional performance, specially non-financial performance (NFP) measures. Contemporary academics and practitioners have also demonstrated that measuring/managing NFP in service organisations is more challenging than in manufacturing organisations. However, not a single study of the role of MA in measuring corporate social responsibility (CSR) in the financial services industry (FSI) has yet been reported, although CSR is an important element of NFP. This study attempts to investigate the role of MA in measuring CSR in various financial institutions in Finland, Sweden and Japan. The results of this study reveal that the management of the studied organisation put more emphasis on financial performance measurement and comparatively less on NFP measurement. CSR is considered important in some banks, but MA plays a relatively small role in the measurement of these elements. The empirical findings of this study point to areas for future research.

Management accounting and performance measurement practices in service sector in Oman

The importance of management accounting practices in measuring multidimensional aspects of performance is rapidly increasing. However, little is known about such practices in the service sector and even less is known about the practices in developing countries. This paper reports on the performance measurement practices of four Omani service organisations. More specifically, it sought to understand and explain what factors affected the design and use of multidimensional performance measurement systems in the firms studied. The results indicate the way of using the performance measures models of the companies analysed differs depending on managements views and discretion, economic and social constraints, and competition.

Banking policies and regulations: comparative study of Kuwait, UAE and Qatar

The major objectives of regulating the banks are to reduce the risk of failure and to achieve some desired social goals. Regulations are designed to prevent commercial banks from becoming too risky and to maintain public confidence in the countrys financial system. The economic argument for such regulation is that banking, by its very nature, is prone to market failure. In recent years, the central monetary authorities of six GCC countries have made many regulatory changes in order to achieve certain social and economic goals. The monetary authorities of GCC countries have strengthened prudential norms. Asset classification and provisioning norms have moved closer to international standards. Banks are required to maintain capital to risk weighted assets ratios of at least 8% required by the BIS. Local banks use International Accounting Standards. Overall, the Central Monetary Authorities in these countries are very proactive in terms of supervising and monitoring their regulations on banking sectors.

Organisational strategic orientation and its impact on non‐financial performance measurement in the financial services industry

Management Accounting (MA) practice is one strand in the complex weave that makes up the social fabric. Social patterns of interaction and societal presuppositions that impel people to act in certain ways are all factors that potentially impinge on the role and nature of MA. Some researchers recognise that normative pressures, as they are associated with social obligations and appropriate social conduct in human behaviours, are significant as far as MA practices are concerned. Thus, MA practices should be understood along with the effects of organisational, vis‐a‐vis management’s, strategic orientation (as a part of normative pressures) in organisations. This empirical study investigates the effect of organisational strategic orientation on performance, especially Non‐financial Performance (NFP) measurement in different types and kinds of financial institutions in Finland, Sweden and Japan. The study reveals that organisational strategic orientation highly influences NFP measurement in financial institutions, though the effects of this factor are different in different financial institutions. After providing the empirical result, some research directions are given for further research.