The Adoption of Outcome-Related Performance Indicators in External Reporting: An Empirical Study

ABSTRACT

Contemporary government reforms are changing how performance is measured and evaluated, by shifting the focus from inputs and processes to outputs and outcomes. This study uses agency theory, institutional theory, and organizational information processing theory to hypothesize and assess how particular organizational and institutional factors affect the disclosure of outcome information by public organizations, drawing on an empirical analysis of 214 Italian public organizations. Organizational size, mode of service delivery, and the degree of regulation are all strongly associated with the disclosure of outcome indicators in external performance reports.

KEYWORDS:

• Disclosure
• external reporting
• outcome indicators
• performance measurement
• public sector

Notes

^1. In this article, the terms “normative” and “positive” are used with the meaning given by Watts and Zimmerman (1978, p. 148) in their discussion of accounting theories. Normative approaches aim to set out what should be done (i.e., they are prescriptive). Given the emphasis on decision-making or accountability as the purpose of performance measurement, such approaches tend to make judgments about what the users of performance information need to be able to do this. In contrast to normative statements, the positive (also labeled descriptive or empirical) approach is concerned with describing how the world works. As with what positive accounting theory says about accounting information, it can be said that the major aim of the positive approach is to explain and predict the supply and demand of performance information by analyzing the costs and benefits of the different configurations of performance measurement and reporting systems, taking into account the type of players involved and the characteristics of the internal and external environment.