This paper proposes a conceptual analytical framework for inferring organizational decision quality from financial statements. The framework is based on the premise that managerial decisions, although not directly observable, generate structured financial manifestations that can be systematically interpreted. Managerial decisions, although central to organizational performance, are not directly observable. Instead, their consequences become embedded within financial outcomes recorded in accounting statements. The framework interprets financial statements as observable manifestations of underlying decisional processes. Decision Quality (DQ) is introduced as a latent organizational variable inferred from three structural dimensions: inter-statement coherence, alignment between committed resources and realized outcomes, and temporal consistency of financial trajectories. Rather than replacing traditional financial analysis, the framework extends its analytical scope by shifting attention from financial outcomes alone to the structural quality of the decisional processes that generate them.
Vargas et al. (Sat,) studied this question.