The Cost of Financial Misconduct in Non-Profits
72 Pages Posted: 22 Feb 2021
Date Written: January 26, 2021
I explore the impact of financial crime on non-profit fundamentals, showing that service revenue and employee compensation, the largest sources of non-profit revenue and expenditures, fall in the years following financial misconduct and its disclosure. However, I observe no declines in volunteerism or employment after financial crime. These results do not align well with the reputational damage hypothesis proposed by prior scholarship. Assuming a competitive free market for services and labor, my findings suggest that afflicted non-profits may experience declines as a result of either operational disruptions that follow the discovery and disclosure of crime or some other non-reputational consequences.
Keywords: Non-Profits; Financial Crime; Compensation; Revenue
JEL Classification: J3, G3, E3
Suggested Citation: Suggested Citation