Financial reporting transparency, citizens' understanding, and public participation: A survey experiment study
| Published date | 01 June 2023 |
| Author | Cecilia Langella,Eugenio Anessi‐Pessina,Nives Botica Redmayne,Mariafrancesca Sicilia |
| Date | 01 June 2023 |
| DOI | http://doi.org/10.1111/padm.12804 |
ORIGINAL ARTICLE
Financial reporting transparency, citizens'
understanding, and public participation: A survey
experiment study
Cecilia Langella
1
| Eugenio Anessi-Pessina
1
|
Nives Botica Redmayne
2
| Mariafrancesca Sicilia
3
1
Department of Economics and Business
Management Sciences, Università Cattolica
del Sacro Cuore, Milan
2
School of Accountancy, Massey University,
Palmerston North, New Zealand
3
Department of Management, University of
Bergamo, Bergamo, Italy
Correspondence
Cecilia Langella, Department of Economics
and Business Management Sciences,
Università Cattolica del Sacro Cuore.
Email: cecilia.langella@unicatt.it
Funding information
Società Italiana dei Docenti di Ragioneria e di
Economia Aziendale, Grant/Award Number:
assegni di sostegno alla ricerca 2019
Abstract
This study investigates the conditions under which trans-
parency contributes to citizens' understanding of financial
reporting and examines how this enhanced understanding is
associated with public participation. To this end, a survey
experiment was conducted in which two attributes of finan-
cial reporting transparency (i.e., content clarification and
presentation format) were the manipulated variables,
whereas citizens' understanding and public participation
were the outcome variables. Results demonstrate that the
provision of explanations to clarify obscure technical jargon
does have a positive effect on citizens' understanding. A
similar effect was found for the provision of graphical and
visual representations. However, the study reveals that
there is no additional benefit in simultaneously providing
both explanations of technical jargon and visual aids. Fur-
thermore, findings show that the levels of public participa-
tion are highest among the individuals who felt they
understood the financial information the best, but yet pos-
sessed the lowest level of actual understanding.
Received: 20 July 2021 Revised: 10 November 2021 Accepted: 14 November 2021
DOI: 10.1111/padm.12804
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
© 2021 The Authors. Public Administration published by John Wiley & Sons Ltd.
584 Public Admin. 2023;101:584–603.
wileyonlinelibrary.com/journal/padm
1|INTRODUCTION
Governments all around the world are involved in a number of transparency initiatives. These initiatives have been
expected to produce a wide range of positive outcomes, including citizen participation (Cohen et al. 2017;
Cucciniello et al. 2017; Halachmi & Greiling 2013; Manes Rossi 2019; Manes Rossi et al. 2019; Meijer et al. 2012;
Piotrowski & Borry 2010; Porumbescu et al. 2017). In principle, informed citizens should be better placed to contrib-
ute to the democratic process. However, recent research has highlighted the need for further investigation, as
greater transparency may not automatically translate into higher participation (Muthomi & Thurmaier 2020; Ruijer &
Meijer 2020; Worthy 2015), hence the need to untangle the relationship between transparency and public participa-
tion and, particularly, to clarify the mechanisms that may link the former to the latter.
This study contributes to addressing this gap by focusing on the case of government financial reporting transpar-
ency. Drawing on the public administration literature, the study highlights a component of transparency that has
often been taken for granted and has never been fully and explicitly investigated, namely information understand-
ability. Understandability, in turn, is a crucial prerequisite for usability. For financial reports, it becomes all the more
relevant, because despite widespread attempts by governments to communicate financial information to their com-
munities, citizens are often barely able to understand and interpret such information (Manes Rossi et al. 2019). Exis-
ting literature offers limited evidence about how to improve citizens' understanding and how such understanding
can affect citizens' attitudes or behaviors.
In particular, this study aims at analyzing whether transparency influences citizens' understanding of financial
information and whether this enhanced understanding affects public participation. To this end, the research focuses
on local governments, that is, the tier of government closest to citizens. The analysis was carried out in
New Zealand, which has a long tradition in the provision of high-quality financial information to the general public
(Benito et al. 2007; Laswad & Botica Redmayne 2015). In the last 30 years, the New Zealand public sector experi-
enced accrual accounting from the early 1990s, modified IFRS from 2007 to 2012, and IPSAS-based standards after
2012. Keeping governments accountable to the general public and encouraging active public participation are con-
sidered objectives of primary importance for the country.
Our study contributes to the literature in several ways. First, it investigates a facet of transparency that has
never been explicitly examined, namely the understandability of disclosed information. Second, it contributes to the
literature on government accounting and reporting in that (i) it adopts citizens' viewpoint, which has mostly been
neglected by extant research, and (ii) it analyses the conditions for improving understandability of public-sector
financial reporting. Third, it makes an attempt to untangle the relationship between transparency and public partici-
pation by looking at the role of citizens' understanding. Fourth, with respect to citizens' understanding, it recognizes
the importance of distinguishing between objective and subjective understanding, and it highlights the relevant
implications.
The remainder of the paper is organized as follows. The next section illustrates the literature review and pro-
vides the motivations for the predicted associations among transparency, citizens' understanding, and public partici-
pation. The research methods are presented in Section 3, and the results are summarized in Section 4. The final two
sections discuss the findings and conclude the paper by raising implications for both theory and practice, acknowl-
edging the limitations of the study, and offering directions for future research.
2|LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
Transparency has been defined as “the ability to look clearly through the windows of an institution”(Den Boer 1998,
p. 105). In a recent literature review, Cucciniello et al. (2017) grouped the definitions of transparency into two cate-
gories focused, respectively, on the availability and accessibility of information. The former relates to the breadth of
available information, whereas the latter considers stakeholders' access to information. In this last respect,
LANGELLA ET AL. 585
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