Institutional Dynamics and Financial Reporting Quality in Ghana’s Public Sector: The Moderating Role of Leadership Styles

Abstract

This study examines how institutional dynamics (ID) – regulatory environment, societal expectations, government structure, and stakeholders’ expectations – influence public sector financial reporting (PSFR) quality in Ghana, highlighting the moderating role of leadership styles. Guided by Institutional Theory and the Contingency Theory of Leadership, the research investigates how institutional pressures affect reporting quality and how leadership styles – transformational, transactional, participative, and autocratic – shape these effects. We adopted a quantitative, cross-sectional, explanatory design to investigate the effects of adopting accounting on financial reporting in the public sector in Ghana, with leadership styles (transformational, transactional, participative, and autocratic) as the moderating factor. A cross-sectional approach was used to collect data simultaneously across institutions. Data were collected from 344 senior finance officers and administrators across selected ministries, departments, and agencies and analysed using Structural Equation Modelling (SEM). Findings indicate that societal expectations and government structure positively influence reporting quality, whereas stakeholders’ expectations and the regulatory environment have no significant direct effects. Overall, ID collectively enhance reporting quality, with transformational, participative, and transactional leadership styles strengthening this relationship, whereas autocratic leadership reduces it. This study is among the first to empirically examine leadership styles as a moderator in the relationship between institutional pressures and reporting quality in a developing-country context. The research provides practical recommendations for policymakers, including strengthening enforcement, improving mechanisms for civic engagement, reforming bureaucratic structures, and aligning leadership strategies with institutional processes to enhance PSFR.