Financial Reporting Factors Affecting Donations to Charitable Not-for-Profit Organizations
16 Pages Posted: 5 Apr 2004
Date Written: December 18, 2003
In order to examine the value of accounting reports for not-for-profit organizations, previous accounting studies primarily investigate the association between donations and accounting information. Prior studies primarily explore the relation of donations to accounting measures of efficiency and stability and find that more efficient and more stable organizations generate greater total contributions. However, there is no consensus on which variables are related to donations, and several measures are used as proxies for similar constructs. We posit that there are four conceptual factors that are related to donations. The factors are the efficiency of the organization in allocating resources to its programs, the financial stability of the organization, the quantity of information available to donors, and the quality of the information. We use factor analysis with variables from previous studies to test this conceptual framework on a large sample of charitable organizations. We find that the variables align on four components that appear to represent the factors that we conceptualize. We also use these four components as predictor variables in an OLS regression specification of direct contributions. The model is significant and explains over 40 percent of the variations in contributions.
Keywords: Not-for-profit organizations, Donations, Charitable contributions, Factor analysis
JEL Classification: M41, M48, L31
Suggested Citation: Suggested Citation