Is the Use of Integrated Performance Measurement System by Banks Really "Integrated"? A Structural Equation Modeling Approach

This paper investigates the implementation of integrated performance measurement (IPM) system, the extent of integration among four performance measures proposed by the balanced scorecard as an IPM framework (namely financial, customer, internal business process, and learning and growth perspectives) and the impact of non-financial disclosure on financial performance. The study employed ex post facto research design. A self-designed disclosure checklist containing forty-eight (48) items across financial (18), customer (18), internal business (4), and learning and growth (8) perspectives was used to analyze performance disclosure for a 3-year period of 2012-2014. Structural equation modeling was used to explore the interaction among the performance measures, as well as the impact of non-financial disclosure on financial performance post-IPM implementation. The study concludes that banks do not adopt an integrative approach to performance measurement and disclosure, as performance appears to be communicated in a haphazard manner. Failure to embrace an integrative approach to performance disclosure appears to be responsible for the low impact of non-financial disclosure on financial performance. The originality of the current study stems from the awareness that it developed a disclosure checklist that can be used by other studies to assess the quality of performance disclosure in annual reports. To the researchers' knowledge, the study is the first, in the Nigerian context, to assess the level of integration among performance measures in an IPM system using secondary data. The excessive focus on the financial measures implies that firms are not leveraging on the synergistic benefits of an integrative approach to performance measurement and disclosure.