The effect of disaggregated financial statements on potential nonprofit donors

Abstract

PurposeThis study examines the effect that aggregated versus disaggregated financial statements has on a potential donor’s decision to donate to both large and small nonprofit organizations.Design/methodology/approachThis study utilizes 147 participants in a 2 × 2 design in which participants are placed in the role of potential donors.FindingsResults indicate that disaggregated financial statements increase the likelihood of donors donating. Findings suggest that trust serves as a mediating effect, as disaggregated information leads to increased organizational trust, which subsequently leads to an increased likelihood of donating.Research limitations/implicationsProviding participants with a fictitious scenario may not reflect true donor behavior. Participants also have no personal risk in deciding to donate because they are not actually making a financial donation.Practical implicationsOur results provide insight into the decision process of donors as this study suggests that disaggregated information leads to higher donations. As disaggregated information leads to higher trust, organizations are incentivized to provide disaggregated information because it increases the appearance of trustworthiness.Social implicationsFundraising campaigns can benefit from our findings. Nonprofit organizations should evaluate the impact on trust when considering best practices related to disaggregated information.Originality/valueThere is currently a trust crisis in America’s nonprofits, and this study aims to understand how the level of aggregation of financial statement information can increase trust and subsequent donor giving.