The Effects of Governance on the Accuracy of Charitable Expenses Reported by Nonprofit Organizations

51 Pages Posted: 15 Sep 2004 Last revised: 17 Mar 2011

See all articles by Robert J. Yetman

Robert J. Yetman

University of California, Davis - Graduate School of Management

Michelle Yetman

University of California, Davis - Graduate School of Management

Date Written: February 19, 2011

Abstract

Abstract: Various users rely on nonprofit financial information for investing, contracting, and regulating decisions. The ratio of reported charitable to total expenses is one of the most widely used metrics to measure nonprofit performance. Prior research shows that many nonprofit organizations inflate this ratio by overstating their charitable expenses, reducing the decision usefulness of the information. Using a large sample of data from 1998–2006, as well as a sample of data from the newly redesigned 2008 IRS form 990, we find that existing governance mechanisms improve the accuracy of reported charitable expenses across a broad sample of nonprofit organizations.

Keywords: nonprofits, corporate governance, financial reporting quality, charitable expenses, regulation, newly redesigned IRS form 990

JEL Classification: G18, G34, G38, L31, M41, M43, M48

Suggested Citation

Yetman, Robert and Yetman, Michelle, The Effects of Governance on the Accuracy of Charitable Expenses Reported by Nonprofit Organizations (February 19, 2011). Available at SSRN: https://ssrn.com/abstract=590961 or http://dx.doi.org/10.2139/ssrn.590961

Robert Yetman

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
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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