Nonprofit Boards: Size, Performance, and Managerial Incentives

52 Pages Posted: 10 Oct 2011  

Rajesh K. Aggarwal

Northeastern University

Mark E. Evans

Wake Forest University

Dhananjay Nanda

University of Miami - School of Business Administration

Date Written: September 1, 2011

Abstract

We examine relations between board size, managerial incentives and enterprise performance in nonprofit organizations. We posit that a nonprofit's demand for directors increases in the number of programs it pursues, resulting in a positive association between program diversity and board size. Consequently, we predict that board size is inversely related to managerial pay-performance incentives and positively with overall organization performance. We find empirical evidence consistent with our hypotheses. The number of programs is positively related to board size. Board size is associated negatively with managerial incentives, positively with program spending and fundraising performance, and negatively with commercial revenue, in levels and changes.

Keywords: Nonprofits, incentives, boards of directors

JEL Classification: D21, G34, J33, L31, M40

Suggested Citation

Aggarwal, Rajesh K. and Evans, Mark E. and Nanda, Dhananjay, Nonprofit Boards: Size, Performance, and Managerial Incentives (September 1, 2011). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1941790

Rajesh K. Aggarwal

Northeastern University ( email )

413 Hayden Hall
360 Huntington Avenue
Boston, MA 02115
United States

Mark E. Evans (Contact Author)

Wake Forest University ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States

Dhananjay Nanda

University of Miami - School of Business Administration ( email )

P.O. Box 248126
Florida
Coral Gables, FL 33124
United States
3052843122 (Phone)

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