A Perception Analysis of Financial and Non-Financial Performance Measurement for Banking Sector in Bangladesh: A Structural Equation Modeling Approach

Abstract

This paper sheds light on perception of the bankers for organizational
performance appraisal through financial and nonfinancial performance dimensions.
The survey, conducted in Bangladeshi banking industry, demonstrates the
association between financial and non-financial performance indicators on banking
performance. Hypotheses were tested with data collected from a sample of 179
managers and senior executives of banks by using structural equation modeling
(SEM) through AMOS 18.0. Results indicate that both non-financial and financial
performance measures significantly affect banking performance leading to
sustainable success and growth in long run. These findings were mostly consistent
with the literature on the effects of financial and non-financial dimensions on
organizational performance. The survey shows that the financial and non-financial
measurements together have an effect on organizational performance outcomes.
Bank managers should restructure the traditional financial ratio based performance
measurement system in favor of a balanced and holistic system incorporating the
non-financial measures.