Donors’ perceptions of financial disclosures and links to donation intentions

ABSTRACT

The not-for-profit literature has not fully explored the decision-usefulness of financial disclosures with respect to the public’s donation intentions. Engaging with this lacuna, this study proposes that reputation and trust serve as important causal links between donors’ perceptions of the decision-usefulness of financial disclosures and their donation intentions. The study adopts the theory of planned behaviour and applies structural equation modelling to 400 useable responses from an Australian survey. The study finds: (1) a strong link between financial disclosures which donors perceive as decision-useful and their perception of the reputation of the reporting not-for-profit organisation (NFP), (2) a close association between donors’ perception of the reputation of an NFP (that is, their behavioural belief) and their trust in the organisation (their attitude), and (3) a significant link between donors’ trust in an NFP and hence their attitude towards the organisation with respect to their donation intentions. These results imply that the decision-usefulness of an NFP’s financial disclosures make donors more inclined to donate to the NFP via the impact of disclosures on donors’ perceptions of reputation and thence trustworthiness. In addition to contributing to the emergent NFP literature on disclosures and giving behaviour, these findings inform financial disclosure policies and practice by furthering the case for decision-useful financial disclosures among NFPs.

KEYWORDS:

• Reputation
• trust
• Australian public
• not-for-profit organisations
• decision-useful disclosures

Acknowledgements

The authors thank the School of Business at Western Sydney University for supporting and funding this research, Dr. Edward Mariyani-Squire, Professor Gabriel Donleavy, the editor and two anonymous reviewers for their insightful and constructive feedback.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 In line with the Theory of Planned Behaviour (discussed below), we use donation intentions (i.e. planned behaviour) as a proxy for actioned behaviour.

2 Representing a response rate of 32.25%, as described anon.

3 Tier 2 can choose to go up to Tier 1, but Tier 1 cannot choose to go down to Tier 2.

4 Furneaux and Wymer (2015)’s study used 2013 data commissioned and published by the Australian Charities and Not-for-Profit Commission (ACNC).

5 Similar to Furneaux and Wymer (2015), Wymer et al. (2020) conducted a secondary data analysis of survey data commissioned by the ACNC.

6 The primary indicators considered by TRA are attitude and subjective norms, whereby attitude is defined as an individual’s evaluation of a behaviour or practice and subjective norms refer to an individual’s general social pressure to engage in a behaviour (Armitage & Conner, 2001).

7 As at October 2020, TPB (Ajzen, 1991) has over 80,000 citations.

8 With Agyemang et al.’s (1990, p. 464) warm glow theory of giving, it can be difficult to discriminate between donation behaviours that are immediately motivated by a desire for the “warm glow” feeling as opposed giving that engenders a “warm glow” as an unintended side-effect of the act of giving.

9 Lohmann’s (1992) calls his approaches Theories X, Y and Z (as in Gordon & Khumawala, 1999). Theory X characterises donors as giving generously but prudently; Theory Y prioritises kindness and mercy over inquiries and calculations; and Theory Z stipulates that “charity like virtue is its own reward” (Gordon & Khumawala, 1999, p. 38).

10 Acknowledging that non-financial and financial donations can be distinguished in terms of underlying motivations – for example, a donation of labour-time is more likely to be an emotional decision than a financial donation (Michaelidou et al., 2015) – this study does not differentiate between financial and non-financial donations and considers people’s donation intentions broadly

11 Although Philipe and Durand (2011)’s study focused on corporate firms, it is reasonable to expect one of their findings – a direct link between disclosures conforming to expected norms and reputation rewards – applies to NFPs as well.

12 Though the study focused on the private sector, its findings are still applicable to the NFP sector, as seen in situations of NFP scandals.

13 It is expected that organisational reputation will have a direct influence on donors’ trust in NFPs as found by Keh and Xie (2009)’s study on corporate organisations and customer intentions.

14 The proposed links are adapted from Stanaland et al. (2011)’s study of the antecedents and consequences of consumer perceptions of corporate ethics in the form of ethics statements. Two constructs from Stanaland et al.’s model - perceptions of financial performance and quality of statements - are beyond the scope of the current study and have not been included in this framework.

15 The NFP definition included within the survey refers more to examples of NFPs rather than the national charity commission’s definition of an NFP being an “organisation which does not operate for the profit, personal gain or other benefit of particular people”. As noted during the pilot test of the questionnaire, a layperson relates better to examples of NFPs than to the Commission’s technical definition; and hence the use of examples within the survey questionnaire.

16 The primary target group of social media campaigns and marketing are 16–25 years old, an age group that does not represent the largest volunteering and donor population of NFPs (Wallace et al., 2017).