The Importance of Qualitative Factors In Corporate Performance Appraisal: Implications For Managers

Abstract

The academic literature has tended to emphasize the formal assessment of organizational performance using largely quantitative criteria. In contrast, relatively little attention has been directed at understanding the role that qualitative information plays in the performance evaluations made by external constituents. The purpose of this paper is to fill this void by describing an empirical study of external decision makers that involved use of both quantitative and qualitative evidence. It is concluded that financial analysts and individual investors rely more heavily on such qualitative considerations as management interpretations and business environment information than on quantitative, financial statement based information for companies operating in dynamic and complex industries. A series of implications for corporate executives are explored.