Adding more science to the craft: improving citizens' understanding through popular financial reporting

Abstract

Purpose-Popular Annual Financial Reports (PAFRs) are used by US state and local governments to provide accessible and understandable financial information to citizens. In this paper, we draw on the boundary object theory to investigate how different features and uses of PAFRs shape citizens' understanding of financial information and their attitudes toward the government's decisions on revenues and expenditures. Design/methodology/approach-To achieve this research goal, we conducted an online survey experiment using a PAFR of a hypothetical city to test how citizens' understanding, perceived usefulness of PAFRs and attitudes differ due to various object features and usage. Findings-We find that given the current formats and contents of US PAFRs, most citizens can recognize basic financial information but are unsatisfied with the level of detail provided. Additionally, providing citizens with contextual information can increase their support for certain tax increases. These findings have practical implications for governments seeking to improve their financial information disclosure practices. Originality/value-This is the first study that examines popular financial reports as a boundary object and uses experiments to test their effectiveness. This research contributes to the literature on popular financial reporting by providing deeper insights into how citizens respond to various features in popular financial reports.