Journal of Business and Policy Research Volume 5. Number 2. December 2010 Pp. 197 – 216 The Effects of Participation in the Development of Performance Measures on Managerial Performance with Fairness Perception as a Mediating Variable: (An Empirical Study of Hospital Industry in Central Java, Indonesia) Y Anni Aryani 1 and Puput Rahmawati 2 The objective of this research is to provide descriptive evidence of the performance measures (financial and non- financial) used in the hospital industry. This research also provides empirical evidence on the effect participation has in the development of performance measures on managerial performance with fairness perception as a mediating variable. A survey research method is employed to empirically test the hypotheses developed in this study. The survey for this study is carried out on the hospital industry in Central Java, Indonesia with the unit’s manager as the unit of analysis. The hospitals located in some districts of Central Java are used as the sampling frame. Statistical analysis methods and path analysis are used to analyse data. This study found that participation in the development of performance measures used in the performance evaluation process positively influences the managerial performance. Participation was also found to positively influence the fairness perception of the performance measures that eventually influence managerial performance. Hence, this study demonstrated that fairness perception moderated the relationship between participation in the development of performance measures and the managerial performance in hospital industry in Central Java, Indonesia. This study also showed that financial measures were perceived fairer than non-financial measures in the performance evaluation process. Field of Research: Managerial accounting, Hospital industry 1. Introduction Companies faced with globalization pressures require a new management strategic plan to sustain its business organization and to adjust with the dynamic business environment. Such a strategic plan requires new performance measurement systems (see, for example: Olve et al., 1999; Bourne et al., 2000; Blenkinsop and Burns, 1992; Burgess et al., 2007; Olsen et al., 2007) to ensure the effectiveness of a new strategy. According to Suprapto et al. (2009), the existence of performance measurement systems 1 Dr Y Anni Aryani, Accounting Department, Economics Faculty, Universitas Sebelas Maret (UNS), Surakarta – Indonesia, email: anni.aryani@live.vu.edu.au 2 Puput Rahmawati, Accounting Department, Economics Faculty, Universitas Sebelas Maret (UNS), Surakarta – Indonesia, email: puput.rahmawati@gmail.com