The Effects of Accumulated Wealth and Corporate Governance Quality on Nonprofit Performance

Abstract

This study will explore the relationship between governance quality, accumulated wealth, and organizational performance in U.S. nonprofits. Accumulated wealth in nonprofits has been previously shown to reduce overall support contributions due to donor perception of reduced need of financial resources. The absence of shareholders in the nonprofit sector also lend itself to weaker monitoring mechanisms and inherent agency problems. Despite the size of the nonprofit sector (5.5% of GDP and 9% of employment), the impact of governance in organizations with accumulated wealth has not received much attention. Using recent data on governance practices at nonprofits, this study finds that the strength of governance practices in nonprofits reduces the negative impact of accumulated wealth in Arts, Health, and Human Services organizations.

Keywords: Nonprofit, nonprofit performance, corporate governance, accumulated wealth