Constraining Managers Without Owners: Governance of the Not-for-Profit Enterprise

47 Pages Posted: 5 Feb 2005

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Robert J. Yetman

University of California, Davis - Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006

Abstract

In the absence of owners, how effective are the constraints imposed by the state in promoting effective firm governance? This paper develops state-level indices of governance environment facing not-for-profits and examines the effects of these rules on not-for-profit behavior. Stronger provisions aimed at detecting managerial misbehavior are associated with significantly greater charitable expenditures, increased foundation payouts and lower insider compensation. Instrumental variables analysis confirms the relationship between the governance environment and not-for-profit performance. The paper also examines how governance influences an alternative metric of not-for-profit performance - the provision of social insurance. Stronger governance measures are associated with intertemporal smoothing of resources and greater activity in response to negative economic shocks.

Keywords: Not-for-Profits, corporate governance, social insurance

JEL Classification: L30, G30, G34, G38, H40, K20

Suggested Citation

Desai, Mihir A. and Yetman, Robert, Constraining Managers Without Owners: Governance of the Not-for-Profit Enterprise (September 2006). Available at SSRN: https://ssrn.com/abstract=661301 or http://dx.doi.org/10.2139/ssrn.661301

Mihir A. Desai (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert Yetman

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

One Shields Avenue
Davis, CA 95616
United States

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