The Impact of Controlling Families and Foreign Institutional Investors on Non-financial Performance Measures

This study examines how controlling family ownership and foreign institutional ownership affect companies’ use of non-financial performance measures (NFPMs). We conducted two surveys (one in 2005 and the other in 2015) with publicly listed companies and used archival data from 254 respondent companies in Taiwan. Our results from the 2005 data show that foreign institutional ownership increases the use of NFPMs, while family control is not associated with the extent of NFPM use. After 10 years, the full sample shows that both controlling families and foreign institutional ownership have enhanced NFPM use. Furthermore, the full sample data reveal that controlling families demand more NFPMs when the CEO is not a family member. These results suggest that foreign institutional ownership increases the use of non-financial performance measures, shedding additional light on the trade-off between monitoring mechanisms and the design of optimal performance measures.