The Effect of Nonprofit Governance on Donations: Evidence from the Revised Form 990

47 Pages Posted: 30 Sep 2012 Last revised: 29 May 2015

See all articles by Erica Harris

Erica Harris

Rutgers, The State University of New Jersey - Rutgers University, Camden

Christine Petrovits

College of William and Mary - Mason School of Business

Michelle Yetman

University of California, Davis - Graduate School of Management

Date Written: June 11, 2014

Abstract

We examine whether donors reward nonprofit organizations with better governance. We obtain governance data from newly available disclosures on the IRS Form 990. For 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 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, mandatory disclosure of governance policies for nonprofit organizations provides an interesting contrast to mandatory adoption of governance policies for publicly traded companies.

Keywords: nonprofit, corporate governance, disclosure, IRS Form 990, donations

JEL Classification: G18, G38, H39, L30, L31, L38, M40, M41, M42, M48

Suggested Citation

Harris, Erica and Petrovits, Christine and Yetman, Michelle, The Effect of Nonprofit Governance on Donations: Evidence from the Revised Form 990 (June 11, 2014). Harris, E., Petrovits, C., and Yetman, M. H. (2015). The effect of nonprofit governance on donations: Evidence from the revised form 990. The Accounting Review 90(2): 579-610.. Available at SSRN: https://ssrn.com/abstract=2154548 or http://dx.doi.org/10.2139/ssrn.2154548

Erica Harris (Contact Author)

Rutgers, The State University of New Jersey - Rutgers University, Camden ( email )

Camden, NJ 08102
United States

Christine Petrovits

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Michelle Yetman

University of California, Davis - Graduate School of Management ( email )

128 AOB IV
One Shields Avenue
Davis, CA 95616
United States
530-754-7808 (Phone)
530-752-2924 (Fax)

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