Spreading the News: Donor Response to Disclosures About Nonprofit Fraud

Harris, E. E., Petrovits, C. M., & Yetman, M. H. (2023). Spreading the News: Donor Response to Disclosures About Nonprofit Fraud. Nonprofit and Voluntary Sector Quarterly, 0(0). https://doi.org/10.1177/08997640231179752

1 Pages Posted: 22 Aug 2017 Last revised: 10 Jul 2023

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: July 3, 2023

Abstract

Even the most conscientious nonprofit organizations can fall victim to fraud. We examine how a nonprofit organization’s Form 990 disclosures and media coverage about an asset diversion influence subsequent donor support. Consistent with a loss in trust, we observe a decrease in donations following a diversion. This decrease is amplified when the diversion is reported in the news. We also find that donations decline more when organizations do not provide transparent disclosures and when losses are higher but only if the diversion receives media coverage. Finally, our results indicate that donors punish organizations less when they report higher recoveries and governance improvements. This study describes mechanisms though which news coverage enhances donor oversight. The media can: (a) directly inform some donors, (b) prompt some donors to obtain further information, and (c) motivate organizations to provide higher-quality disclosure.

Keywords: fraud, media, transparency, donations

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

Suggested Citation

Harris, Erica and Petrovits, Christine and Yetman, Michelle, Spreading the News: Donor Response to Disclosures About Nonprofit Fraud (July 3, 2023). Harris, E. E., Petrovits, C. M., & Yetman, M. H. (2023). Spreading the News: Donor Response to Disclosures About Nonprofit Fraud. Nonprofit and Voluntary Sector Quarterly, 0(0). https://doi.org/10.1177/08997640231179752, Available at SSRN: https://ssrn.com/abstract=3021543 or http://dx.doi.org/10.2139/ssrn.3021543

Erica Harris

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 (Contact Author)

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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