State and local governments regularly disclose financial
information to the public so that the current financial status of the
government is recognized publicly. The purpose of such
disclosure is to achieve accountability and inform citizens about
governments’ financial decisions. Despite the efforts to improve
the accessibility and readability of financial information, we do
not know whether and how the financial information is processed
by citizens. This study investigates how citizens assess the
financial condition of governments when different financial
information is presented. We conduct an online survey
experiment to understand how disclosed financial information
shapes citizens’ perceived level of a government’s fiscal stress
and their attitudes toward governments’ revenue-raising
strategies. We find that citizens prioritize the financial indicators
that they are familiar with, such as debt and surplus ratios. While
both historical and social reference points play an important role,
social reference is more effective in influencing citizens’
perception. We only find limited evidence to support the
relationship between citizens’ perception of fiscal stress and their
support toward governments’ decisions to raise revenues.
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