Accounting, Auditing &
Vol. 15 No. 2, 2002, pp. 162-183.
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practices in Japanese banks
A new institutional sociology perspective
Md. Mostaque Hussain
Department of Accounting, College of Commerce,
Sultan Qaboos University, Muscat, Oman
School of Accounting and Finance, Griffith University,
Gold Coast Campus, Queensland, Australia
Keywords Performance measurement, Organizational effectiveness, Banks, Japan
Abstract 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.
In recent years, interest in ``performance'' (or effectiveness) measures has
grown, as evidenced by the large portion of literature investigating
``benchmarking'', ``total quality'' measures and ``balanced scorecards''. These
embrace non-financial as well as financial measures and, more recently, have
focused on measures of an organization's intellectual capital. The increased
attention to such systems by managers, consultants, and academics reflects the
pressures that result from vigorous competition. This, in turn, forces
organizations to improve their performance to survive.
Scholars suggest that the conventional emphasis on traditional performance
measures such as return on investment or net earnings distracts from non-
financial factors such as market share, customer satisfaction, efficiency and
productivity, product quality, and employee satisfaction (Lynch and Cross,
1991; Kaplan and Norton, 1996, 2001; Otley, 1999). Furthermore, there is also
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The financial support of the Scandinavia-Japan Sasakawa Foundation to this study is gratefully
acknowledged. The first-named author is especially grateful to Professor Takaya Ichimura of
the School of Business and Commerce at Nihon University for his help in arranging the visit to
Tokyo and correspondence with Japanese banks. The helpful comments of Trevor Hopper, E.K.
Laitinen, Jodie Moll, Wendy James, Bob Scapens, Lee Parker (the editor) and the two reviewers
are also gratefully acknowledged.