Board size and financial transparency : an investigation of Australian not-for-profit organisations

Headlines regarding allegations of fund misappropriation by not-for-profit organisations (NFPs) have led to concerns about the governance and financial transparency of NFPs. Australian NFPs have been no exception to these concerns. Contemporary NFP studies examining board size and financial statement disclosures have focused on USA (Saxton et al. 2012) and Malaysian contexts (Zainon et al. 2014). Extant studies have investigated the influence of board mechanisms on the accuracy of financial statements (Yetman and Yetman 2012) and on financial web disclosures by NFPs in the USA (Lee and Joseph 2013). Other studies have explored the impact of governance boards on annual report disclosures made by Malaysian (Arshad et al. 2013) and Portuguese NFPs (Carvalho et al. 2017). This paper adds to current NFP literature by investigating the influence of board size on the financial transparency of publicly reporting Australian NFPs. The paper addresses its main research question using a resource dependence theoretical (RDT) framework, as introduced by Pfeffer and Salancik (1978). The main observation of this paper is a statistically significant relationship between board size and financial statement disclosures. Larger boards potentially have greater collective expertise, facilitating the use of financial statement disclosures to meet the information needs of resource providers and to support the financial sustainability of NFPs. The paper concludes publicly reporting NFPs need to pay more attention to their board size as the latter impacts their financial transparency and financial sustainability.