Access, Board Size, and Incentives in Non-Profit Firms

48 Pages Posted: 19 Jul 2006

See all articles by Rajesh K. Aggarwal

Rajesh K. Aggarwal

Northeastern University

Mark E. Evans

Wake Forest University

Dhananjay Nanda

University of Miami - Department of Accounting

Date Written: May 2006

Abstract

We study the relation between board size and managerial incentives in non-profit firms. We present a model where board membership is granted to parties that wish to direct the manager's actions in exchange for assets that they bring within the firm. These board members (directors) differ in the relative value they place on the nonprofit's activities. In this setting, we show that the manager's incentives are lower than would be had the board been smaller, although the nonprofit's ability to raise funds is higher. Our empirical results are consistent with the model's predictions. We find that non-profits that pursue more objectives have larger boards, lower managerial pay-performance sensitivities, and higher revenue and program spending growth rates.

Suggested Citation

Aggarwal, Rajesh K. and Evans, Mark E. and Nanda, Dhananjay, Access, Board Size, and Incentives in Non-Profit Firms (May 2006). AAA 2007 Management Accounting Section (MAS) Meeting. Available at SSRN: https://ssrn.com/abstract=918011 or http://dx.doi.org/10.2139/ssrn.918011

Rajesh K. Aggarwal

Northeastern University ( email )

413 Hayden Hall
360 Huntington Avenue
Boston, MA 02115
United States

Mark E. Evans (Contact Author)

Wake Forest University ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States

Dhananjay Nanda

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

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