How Does Financial Transparency Influence Citizens' Trust in Nonprofit Organizations? The Moderating Role of Financial Information on Fiscal Stress

Abstract

Public disclosure of financial information by nonprofit organizations is a cornerstone of nonprofit governance. Evidence indicates that negative impressions are more impactful than positive ones, even when they are of equal intensity. Nevertheless, little research has evaluated the extent to which financial transparency and the positive-negative asymmetry influence citizens' trust in nonprofit organizations. Using a survey experiment, we examine whether financial transparency-through the moderating effect of fiscal information-influences nonprofit trustworthiness. The effect was strongest for negative financial information, demonstrating that the positive-negative asymmetry influences the impact of financial transparency. This study contributes to the literature on the relationship between financial transparency and citizens' trust in nonprofit organizations, including how they verify the legitimacy of nonprofit organizations. This study's findings have practical implications for nonprofit organizations' commitment to financial transparency in building trust among their constituents.