The relevance of non-financial key performance indicators

• Main Authors: FANG, Bingxu, MOHANRAM, Partha, VYAS, Dushyant
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Accounting
• Online Access: https://ink.library.smu.edu.sg/soa_research/1951; https://ink.library.smu.edu.sg/context/soa_research/article/2978/viewcontent/KPI_Project_Report_Jan_2020___White_Paper__1_.pdf
• Institution: Singapore Management University

The limitations of financials statements in assessing firm performance have long been known to the academic and practitioner accounting communities. Recent years have witnessed a sharp increase in the frequency and scope of non-financial Key Performance Indicators (KPIs) disclosed by companies and used by market participants. In this study, we investigate the relevance of various voluntarily reported non-financial KPIs. We find that KPIs are positively associated with future profitability, sales growth, and current stock returns; however, the stock market underreacts to the information embedded in KPIs for firms operating in opaque information environments.