The Effect of Nonprofit Governance on Donations: Evidence from the Revised Form 990
Harris, Erica, Petrovits, Christine M., Yetman, Michelle H.
The Accounting Review · 2015 · Volume 90 · Issue 2
Abstract
We examine whether donors reward nonprofit organizations that report better governance. From a sample of 10,846 organizations from 2008 to 2010, we first identify seven nonprofit governance dimensions using factor analysis. We then test whether the quality of governance influences donor decisions by including the seven governance factors in the standard donor's demand model. We find consistent evidence that donations and government grants are positively associated with six of the seven factors that capture good governance, including formal written policies (e.g., conflict of interest), independent audits and audit committees, review and approval of executive compensation, board oversight (e.g., board independence), management characteristics (e.g., no related parties), and accessible financial information. Our results have implications for nonprofit managers and regulators. Moreover, mandatorydisclosureof governance policies for nonprofit organizations provides an interesting contrast to mandatoryadoptionof governance policies for publicly traded companies. JEL Classifications:G18; G38; H39; L30; L31; L38; M40; M41; M42; M48. Data Availability:All data are publicly available.
Keywords
nonprofit, corporate governance, disclosure, IRS Form 990, donations
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