Effects of Financial Statements Quality and Users' Knowledge on Decision Considerations and the Role of Satisfaction as a Potential Mediator

Abstract

Financial statements are used in organisations as a source of financial information and are used as a tool in decision-making exercises that involve financial decisions. Financial statements indicate the organisations' current financial health and their future potential growth. Both for-profit and nonprofit organisations can benefit from such type of information. Studies show that there is a significant positive relationship between the use of financial statements and decision-making effectiveness. However, this situation is based on the premise that the financial information provided is of high quality and when those who have access to such information understand them and interpret them correctly. Reaching good decisions is vital for organisations, but the implementation of such decisions is equally crucial. Decision-makers need to commit to the decisions taken to reach the goals of the organisations. The decision-making process itself helps in reinforcing the commitment. It is hypothesised that the process is considered satisfactory when the goals set at the beginning of the meeting are met. The more satisfied the decision-makers feel about the process, the more committed they will be to the decisions. The relationship between the quality of the financial statement, the decision-makers knowledge, satisfaction with the decision-making process, and decision commitment has not been researched enough in not-for-profit organisations. Yet, these organisations are involved in complex decision-making situations since they have to balance their social mission and their fiscal responsibility. The study aims to analyse how satisfaction with the decision-making process mediates the effect of financial statements quality and their users' knowledge on the decision commitment in the not-for-profit context. It used a sample from selected not-for-profit entities from Liberia. The findings show that financial statements' quality is associated but does not affect the satisfaction with the decision-making process. On the other hand, satisfaction mediates the effect of knowledge on decision commitment. The findings seem to indicate that not-for-profit organisations need to prepare committee meetings with due diligence to reach optimal decisions and be able to gain full support to implement these decisions.