The effect of the degree of institutionalization of the balanced score card on financial performance

Dissertation for Master's Degree in Industrial Management (Financial Orientation)

Abstract

Today, the importance of performance measurement for organizations has been identified, and it plays an important role in many organizations. In the information age, organizations need to measure all financial and non-financial aspects of their organization. One of the performance evaluation approaches proposed by Kaplan and Norton is the balanced scorecard. On the other hand, one of the most important goals of stock exchange companies is to achieve optimal financial performance. For this reason, in this research, we have investigated the effect of balanced scorecard scores on the financial performance of stock exchange companies. The investigated financial indicators include stock returns, stock price changes, company value, systematic risk, and profit per share. In order to carry out this investigation, after obtaining the balanced scorecard scores of the companies by means of a questionnaire in the four axes of finance, customer, internal processes and growth and learning, financial information of these companies has been extracted. The results obtained in this research show the greatest effect of balanced scorecard scores on company value with a positive relationship, followed by systematic risk with a negative effect. It also shows the effect of balanced scorecard scores on stock returns, profit per share and stock price changes respectively. In general, the results of this research indicate the weak role of evaluation between stock companies and also the effect of systematic risk on the performance of companies.

Introduction:

A life that cannot be measured cannot be lived. Performance measurement systems help managers in implementing their plans by comparing actual results, objectives and goals. Knowing the effectiveness and efficiency of the factors used to reach the final goal of each move can be defined as the main criterion for evaluating that move. For this purpose, all organizations always take various measures to evaluate and monitor their life situation. Surveys conducted on various organizations in the last decade show that performance evaluation is considered as a critical success factor [1]. However, a large number of organizations have not developed and used formal processes to evaluate their performance. (Cravens, Karen, Piercy, Nigel, & Cravens, David, 2000) Performance measurement is one of the best ways to obtain information for decision making in organizations. Managers have always sought to evaluate the performance of their organizations through different scales. Financial dimensions have traditionally been used to measure and evaluate the performance of organizations (Neely, A.D, 1999), but due to the limitations of these financial dimensions - including focusing on short-term results, not paying attention to continuous improvement and competitors' performance, etc. - the need to determine non-financial indicators has also been recognized by other researchers. In other words, just knowing the amount of net profit is not enough, but explaining the driving forces behind any success or failure and understanding organizational advantages that can lead to business success in the future. Managers are also aware that traditional accounting measures such as return on investment and earnings per share, in the environment that today's competitive world demands, can provide misleading signals for continuous improvement and innovation of activities. Although the traditional financial performance criteria worked well in the industrial era, the capabilities and capabilities of today's companies are less relevant.

Since managers and experts tried to compensate for the shortcomings of companies' performance measurement methods, some focused their efforts on making financial criteria more appropriate, and others declared that financial criteria should be forgotten because the optimization of operational criteria such as work cycle time and reducing the percentage of defective goods will automatically lead to more appropriate financial results. to come But it must be said that managers should not choose between financial and operational criteria because none of these criteria alone can be comprehensive enough (Hosseini, Seyed Mahmoud, 2014). Paying attention to different aspects of the organization such as the customer, organization learning, internal and especially financial processes has made this approach more advantageous than other approaches.On the other hand, companies are also looking for ways to maximize shareholders' wealth and achieve their goals. Whether the implementation of this approach can lead the organization to this goal or not is an issue that we will address in this research. 1-2 Statement of the problem:

One of the concerns of the industry and business environment is increasing efficiency and maximizing the benefits of the beneficiaries. Today, in the world, production systems such as balanced scorecard, six sigma, supply chain management, customer relationship management, just-in-time production[2] and They have come to help the industry so that they can have the highest productivity and be able to present their products with the highest quality and satisfaction level in the current competitive world despite the existence of competitive markets and changing paradigms in competitive conditions. One of the performance evaluation systems that has been researched in this field is the balanced scorecard. The balanced scorecard is a framework for describing the activities of an organization from four different aspects, which is done through a number of indicators. (Solimani, Alireza, 2014) In 1992, an article titled "Measures that drive performance" by Kaplan and Norton was published in Harvard Business Review. In this article, it was pointed out that successful companies do not rely only on financial metrics to evaluate their performance, but also evaluate their performance from three other perspectives, i.e. the customer, internal processes, and growth and learning. These are the criteria (customer, internal processes and growth and learning) that create the future financial performance of the company. One of these dimensions is to examine the importance of performance evaluation as one of the important management tools. Different approaches are used to evaluate performance, and the balanced scorecard is one of these approaches. The range examined in this section includes balanced scorecard metrics, including financial metrics, customer metrics, and metrics for internal processes and companies' growth and learning. The financial aspect of this research is also according to the financial evaluation indicators of companies, including profit per share, company value, changes in stock prices, systematic risk and returns of companies. In general, in this research, taking into account all Tehran Stock Exchange companies, we will examine the various aspects of the balanced scorecard approach and its effect on the financial performance of stock companies.

1-4 Importance-necessity and possible results of the research

           Companies should continuously evaluate themselves in order to be able to continue their existence in the domestic and foreign arenas in the current changing market. The entry of companies' products and services into the international arena and world trade depends on reaching their quality and standards and producing world-class products and services. Therefore, companies are forced to carry out detailed and professional evaluations of their operations and programs. The current state of the country's export and import and trade balance compared to other countries shows the absence of these accurate assessments. Therefore, the need to use a suitable and comprehensive method for evaluating companies is evident. One of the performance evaluation methods, which in its new generations is a tool for formulating the company's strategy and operations, is the balanced scorecard. In this research, we intend to evaluate the performance in the organization by using the dimensions of this approach and examine its effects on the company's financial factors, because the company's financial indicators are the result of all the qualitative and quantitative processes of the companies. Investigating the effective relationship between the implementation of the balanced scorecard and the financial performance of companies in the Bahar bond market can lead to the expansion of the use of industrialists in the event of the discovery of the effect of this method, which ultimately consumers will benefit from its benefits and effects on the products, and the way to develop the industry and enter international arenas, as well as the interest of domestic and foreign shareholders to invest more, will be based on these modern methods. 1-5 Research Background In the field of performance evaluation, our country has conducted a balanced scorecard approach. Also, many researches have been conducted related to the effect of financial factors on the stock returns of companies admitted to the stock exchange.