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Performance measurement for accountability in corporate governance

Author

Listed:
  • Ehsan H. Feroz
  • Sanjay Goel
  • Raymond L. Raab

Abstract

Purpose - The purpose of this paper is to show the applicability of data envelopment analysis (DEA) in arriving at an unbiased account of relative performance in a set of companies, using the pharmaceutical industry as an example. Design/methodology/approach - A DEA‐based income efficiency measure of business performance for the pharmaceutical industry is computed. The pharmaceutical industry, which includes many multinational corporations with complex governance problems, and the strategies that allowed firm efficiency rankings to change over time, over ten recent years, are analyzed. Findings - The analyses indicate that the inclines and declines in DEA efficiency rankings are related to the strategic choices made by the upper management. Research limitations/implications - The paper attempted to trace firm behaviorpost hocto validate the DEA rankings. All relevant firm behavior may not have been captured; the paper only attempted to capture behavior reported in the respectable business press, which may introduce a bias. Practical implications - The approach may be ideal to evaluate strategic managers (CEOs, general managers, and presidents) by board of directors, since it relates multiple performance indices to a meta‐measure of performance. Another group of beneficiaries include sector financial analysts. The approach adds a new dimension to sector analysis, to compare specific industries and identify the relative rankings of firms on multiple performance indices. Originality/value - The paper demonstrates the usefulness of DEA in performance governance measurement by applying it to the pharmaceuticals industry.

Suggested Citation

  • Ehsan H. Feroz & Sanjay Goel & Raymond L. Raab, 2008. "Performance measurement for accountability in corporate governance," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 7(2), pages 121-130, May.
    • Handle: RePEc:eme:rafpps:v:7:y:2008:i:2:p:121-130
    DOI: 10.1108/14757700810874100
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    Citations

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    Cited by:

    1. Li Sun & Marty Stuebs, 2013. "Corporate Social Responsibility and Firm Productivity: Evidence from the Chemical Industry in the United States," Journal of Business Ethics, Springer, vol. 118(2), pages 251-263, December.
    2. Ender BAYKUT & Fatih ECER & Ismail KARA, 2016. "A DEA-MALMQUIST Index Application to Analyze Inefficiency Reasons of BIST Corporate Governance Index Companies," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 14-24.
    3. Hsueh-Li Huang & Lien-Wen Liang & Hai-Yen Chang & Hsiu-Yuan Hsu, 2021. "The Influence of Earnings Management and Board Characteristics on Company Efficiency," Sustainability, MDPI, vol. 13(21), pages 1-18, October.

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