Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising

62 Pages Posted: 8 Jul 2020 Last revised: 2 Apr 2021

See all articles by Putnam Barber

Putnam Barber

University of Washington

Megan Farwell

University of Pennsylvania - School of Social Policy & Practice

Brian D. Galle

Georgetown University Law Center

Date Written: Nov 3, 2020

Abstract

Do small-dollar donors seek out potentially adverse information about organizations making fundraising appeals? Do they react when it is readily available? Do they draw negative inferences when critical information is not available? To answer these questions, we consider previously unexamined large-scale natural experiments involving US charitable organizations – tax-exempt organizations that file IRS Form 990.

Using standard difference-in-differences designs, we find that donors penalize organizations with high fundraising costs when there is mandatory disclosure or involuntary disclosure by a third-party reporter. Fundraising efficacy for lower fundraising cost organizations is greater when disclosed in these ways. The contrast with donors’ behavior when such information is not available suggests that they do not draw correct inferences when potentially consequential information is not disclosed. Disclose-on-request requirements, in contrast, apparently do not have any significant impact on donors’ or organizations’ behavior. We then sketch implications for the regulation of donations to charities and their modern cousins, such as crowdfunding and social enterprise organizations.

Keywords: charitable solicitation, fundraising, disclosure, mandatory disclosure, charitable giving, self-regulation

Suggested Citation

Barber, Putnam and Farwell, Megan and Galle, Brian D., Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising (Nov 3, 2020). Available at SSRN: https://ssrn.com/abstract=3625800 or http://dx.doi.org/10.2139/ssrn.3625800

Putnam Barber

University of Washington ( email )

Seattle, WA 98195
United States

Megan Farwell

University of Pennsylvania - School of Social Policy & Practice ( email )

3701 Locust Walk
Philadelphia, PA 19104-6214
United States

Brian D. Galle (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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