Properties of Accounting Earnings in Not-for-Profit Organizations
66 Pages Posted: 3 May 2014
Date Written: January 29, 2007
We examine the time-series properties of nonprofit earnings. We find that nonprofit accrual income measures display a slight mean reverting tendency and asymmetric persistence, similar to properties of business net income. Nonprofits’ operating cash flows have time-series properties similar to their accrual income, suggesting that operating accruals have little effect on these properties. Our results are robust to controls for size, debt and a matched comparison to for-profit firms in the same industries. Since financial accounting rules for nonprofit firms are almost identical to those of businesses, these differences suggest that accounting standards are not the sole determinants of income properties. By comparing financial accounting in nonprofit and business enterprises, we complement research comparing earnings properties of businesses within and across countries.
Keywords: Charities, Regulation, Financial Reporting
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