The nature and extent of the relationship between performance measures and short-termism

This thesis researches the nature and extent of the relationship between performance measures and short-termism. It is empirically based, with the relationship being investigated by way of a critical realist informed case study of a multinational retail organisation. To unpack the relationship and drill down further into the issues involved, the research addresses four questions: How do managers understand the short, medium, and long term? How do inter-temporal decisions manifest? What is the nature of the relationship between performance measures and short-termism? What is the extent of the relationship between performance measures and short-termism? Utilising a combination of semi-structured interviews, non-participant observation, and company documents, the thesis argues that the concepts of short, medium, and long term are empirically messy due to heterogenous meanings. By linking managers’ views about their time horizons to their involvement in different inter-temporal decisions, the thesis proposes that any future definition of short-termism should not just emphasise the inter-temporal trade-off involved in actions, but also the intention that underpins those actions. The thesis reshapes the financial/non-financial dichotomy to illustrate that quantitative (financial and non-financial) measures can lead to short-termism. Nevertheless, between-person differences in inter-temporal responses to how performance measurement information is used to evaluate and reward managers complicates this relationship. Thus, over the course of this thesis, a contingency-based framework is developed; the framework provides individual-level explanations about when, how, and why short-termism occurs. The thesis contributes to the behavioural accounting literature, particularly the empirical literature, which examines the behavioural effects of financial measures by advancing the conceptualisation of short-termism, and provides a nuanced understanding of how short-termism manifests. It also contributes to this literature by synthesising the conceptual landscape in order to build an integrated framework of the nature and extent of the relationship between performance measures and short-termism