Financial and non-financial performance measurement at the municipal group level – Evidence from municipal budgets in Sweden

Purpose - This paper aims to explore Swedish municipalities’ adoption of politically decided goals and targets, within the budget document, that are formulated for the accounting unit of the municipal group. Design/methodology/approach - A regression analysis of the adoption of financial and non-financial performance measurement by 289 Swedish municipalities was performed, including eight independent variables and several control variables. Findings - Of the municipalities, 26% adopted financial and 13% non-financial goals and targets in their 2021 budgets. The former choice appears to be driven by functional rationality, while the latter is driven by institutional and political incentives. The low adoption level of performance measurement implies that political group-level management has not yet adapted to new organisational conditions. Practical implications - To enhance political governance and accountability, controllers should assist politicians in incorporating municipal group goals into the budget. Not least, more attention should be given to non-financial perspectives, as they better support strategy implementation and better promote comprehensive accountability to citizens and stakeholders. A further implication for policymakers is that when designing future legal financial and non-financial requirements for municipalities, it is important to define those at the municipal group level. Originality/value - This study empirically and theoretically contributes to previous research on the adoption of performance measurement as it is the first study to explore the adoption pattern of financial and non-financial performance measurement at the municipal group level. This study further contributes theoretically by highlighting the importance of distinguishing between the adoption of financial and non-financial goals and targets, as the analysis reveals that financial and non-financial performance measures are adopted due to different rationales.