Investigating the impact of management control systems on organizational performance by applying framework of performance measurement systems: a case of banking sector in Pakistan

Asdullah, MA

Abstract

Performance measurement system (PMS), as an integral part of management control systems (MCS), has a critical role in guiding organizational members toward goals and evaluating the extent to which management has achieved the set goals. This is because organizations which are able to continuously monitor and manage their performance are more likely to succeed. Thus, owing to the growing importance of MCS and PMS, especially in developing countries which are under studied, this study has been targeted to evaluate the impact of PMS and MCS on organizational performance (OP) in a developing country ‘Pakistan’. Moreover, there are very limited studies that have targeted to study the same in banking industry in developing countries, and in this case in Pakistan, using the variables of PMS and MCS. The present study is aimed to evaluate the impact of PMS on OP in the banking sector of Pakistan and it has also discussed the different types of MCS and factors of PMS contributing at banks in Pakistan. Moreover, the mediating role of MCS between PMS and OP is analyzed.

In this regard, a sample of 106 bank branches in Pakistan has been selected which are located in different parts of the country. The data has been collected using a structured questionnaire. The hypotheses were tested using linear regression and mediation as well as multiple mediation analysis. The findings suggest that the banks in Pakistan implement the four levers of controls including diagnostic controls systems (DCS), interactive controls systems (ICS), belief controls systems (BLCS), boundary controls systems (BCS), with highest application of BCS. The results of the study also suggest that both financial performance measurement system (FPMS) and non-financial performance measurement system (NFPMS) have a significant positive relationship with MCS whereas MCS has significant positive impact on organizational financial performance (FP) and non-financial performance (NFP) of banks. Mediation analysis suggests that MCS partially mediate the relationship between PMS and OP (both FP and NFP). In a model of multiple mediation taking all four controls simultaneously, the results indicate that BCS and BLCS are partial mediators between FPMS and FP while DCS and BLCS have been proved as significant partial mediators between NFPMS and NFP. Results also revealed that ICS has not proved as a mediator in any relationship except in the linear model.

The study is quite helpful in making both practical and theoretical contributions. It has bridged the gap in literature by analyzing the impact of PMS on OP taking MCS as a mediator in Pakistani banking system. It has also combined both financial and non- financial performance aspects in one study which has rarely been made in literature of PMS and OP, in the context of Pakistan. On practical side, the study provides valuable suggestions to Pakistani banks to improve their performance.

Keywords: Performance measurement systems, management control systems, organizational performance, diagnostic controls systems, interactive controls systems, belief controls systems, boundary controls systems

Citation

Asdullah, M. Investigating the impact of management control systems on organizational performance by applying framework of performance measurement systems: a case of banking sector in Pakistan. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Dec 12, 2022
• Publicly Available Date: Dec 12, 2022
• Award Date: Jul 7, 2022