Incremental Information Content of Financial and Non-Financial Performance Measures

Nimer Slehat, Munther Alnimer, Sinan Abbadi


Previous research has yielded mixed results concerning the connections between financial and non-financial measures of performance; furthermore, the relative value of these measures has yet to be effectively investigated. This paper contributes to the discussion of non-financial metrics by investigating the predictive value of multiple non-financial performance measures as compared to financial performance measures. This analysis includes quarterly panel data gathered from 31 US airline companies during the period of 2003-2007, to test the hypothesis that non-financial measures are in fact leading indicators for lagged financial performance and therefore have greater incremental information content than that provided by financial measures.
The results of this study indicate that various non-financial performance measures can be leading indicators for lagged accounting numbers. Consequently, non-financial measures have an incremental information content advantage over conventional accounting numbers. Finally, the lag-search results suggest that the benefits in improving non-financial measures of performance would take place in the short-term. Thus, they can be included in managers’ compensation plans to encourage enhanced performance.


Non-financial performance measures, Incremental information content, Balanced Scorecard

Full Text:



  • There are currently no refbacks.