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Performance Measurement Systems Design Choice: The Roles of Political Connections and Social Networking on Firm Performance – Evidence From China

Vincent K. Chong ^a

Gary S. Monroe ^b

Isabel Z. Wang ^c

Feida (Frank) Zhang ^d

^aThe University of Western Australia, Australia

^bUNSW Business School, Australia

^cThe Australian National University, Australia

^dThe University of Queensland, Australia

Advances in Accounting Behavioral Research

ISBN: 978-1-80455-799-0, eISBN: 978-1-80455-798-3

Publication date: 13 March 2023

Abstract

This study examines the effect of employees' perceptions of political connections on performance measurement systems (PMS) design choice and firm performance. In addition, this study explores the moderating effect of social networking, a very common and widely used factor by domestic and foreign multinational firms operating in China, and its joint effect with political connections or PMS design choice on firm performance. We collected survey responses from a sample of 110 managers from manufacturing firms in China. Our results reveal that highly politically connected managers use nonfinancial measures, leading to improved firm performance. Our results suggest that social networking interacts significantly with political connections, and nonfinancial and financial measures on firm performance. The theoretical and practical implications of our findings are discussed.

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Acknowledgements

Acknowledgments

We thank Chong Lau, David Woodliff, and an anonymous referee for their helpful suggestions and comments on drafts of this chapter. Comments by participants at the 2019 Asian-Pacific Conference on International Accounting Issues, Warsaw, Poland, and the 2019 Asian Academic Accounting Association Annual Conference, Seoul, South Korea, are appreciated. We gratefully acknowledge the research funding support from the Accounting and Finance Association of Australia and New Zealand (AFAANZ) Research Grant.

Citation

Chong, V.K., Monroe, G.S., Wang, I.Z. and Zhang, F.(. (2023), "Performance Measurement Systems Design Choice: The Roles of Political Connections and Social Networking on Firm Performance – Evidence From China", Karim, K.E. (Ed.) Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 26), Emerald Publishing Limited, Leeds, pp. 43-77. https://doi.org/10.1108/S1475-148820230000026003

Publisher

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Emerald Publishing Limited