Influence of institutional pressures on performance measurement systems

Grounded in DiMaggio and Powell’s (1983) institutional isomorphism perspective of institutional theory, the purpose of this study is to examine the influence of institutional pressures on the performance measurement system (PMS) within banks and financial institutions.

A survey was used to collect data from 71 banks and financial institutions operating in Australia.

Four institutional pressures, the normative pressure “corporate change” and the coercive pressures “economic and financial legislation”, “socio-economic political pressures” and “banking regulations” were found to be associated with the use of multi-dimensional performance measures. In addition, the coercive pressure “economic and financial legislation” and the normative pressure “corporate change” were associated with the use of financial, internal and learning and growth performance measures. Finally, the use of internal and learning and growth measures was positively associated with the coercive force “socioeconomic-political pressures”, and the use of financial measures was associated with the coercive pressure “banking regulations”.

Given the recent global financial crisis, the study offers a reference within the contemporary performance measurement literature in relation to the influence of institutional pressures on the PMS within banks and financial institutions.

While prior research has focused on manufacturing organisations, this study deepens our understanding of the institutional environment of banks and financial institutions and how specific coercive, mimetic and normative forces influence the PMS.