The nonprofit sector is becoming increasingly important to the U.S. economy both as an employer and service provider. Although most of the sector’s revenues are earned, the ability of the nonprofit sector to generate significant levels of unearned income in the form of grants and contributions reinforces the sector’s uniqueness. This dissertation uses the NCCS-Guidestar data to address questions pertaining to the determinants of nonprofits’ contributions and government grants. Each of the essays’ findings is discussed briefly below. The first chapter examines the relationship between an organization’s finances and the level of government grants received. Because organizations choose to apply for government grants, a Heckman procedure is coupled with fixed effects to produce unbiased, within organization estimates. When controlling for the probability an organization receives grant funding, the average level of grants an organization receives generally increases with improvements in efficiency measures. In testing Brooks’ (2004) adjusted performance measure, the author finds that for many categories of nonprofit organizations, improvements in performance relative to community expectations increase grants for recipients, but better performance reduces the probability an organization receives any government grants. The second essay examines the determinants of direct support to organizations in four of the major categories, namely Arts, Education, Health, and Human Services, using instrumental and panel techniques. Unlike government grants, changes in price do not affect organizations’ expected contributions. When significant, government grants generally crowd out private donations while the effects of program service revenue vary by category and specification. The final essay examines the effects of nonprofit expenses and revenues on direct support for organizations in four small subcategories, Disaster Preparedness, International Aid, Environmental Conservation, and Performing Arts. The essay tests whether the impact of various revenue and expense variables on direct support changes around an unexpected event such as 9/11. Results suggest that the events of 9/11 had a greater moderating effect for categories losing funding compared to categories that received a windfall of contributions.

Chapter 1 raises the research question guiding this study. Do relationships that board members of nonprofits have to officials in other agencies affect the likelihood of acquiring grants? The objective of this study was to examine the role that relationship ties played in the nonprofit sector’s ability to receive grants. Chapter 2 ties the research agenda to existing research. Nonprofit organizational and financial behavior was explained in terms of resource dependence. Since nonprofit organizations face uncertainty in resource allocation, the behavior of the organization and the board members change in reaction to uncertainty. The relationships that board members possess serve as social capital for the nonprofit through a series of formal and informal ties. Chapter 3 provides a theoretical framework for measuring relationship ties as well as other variables to funding. Ties that were measured included previous work experience in government agencies, nonprofit agencies, for-profit organizations, and universities. Relationships ties also included previous appointment to a nonprofit board and membership in professional associations. Additional variables such as financial and organizational measures were considered that had an effect on funding likelihood. Expected funding then became a function of all of these variables. This framework led to the hypothesis that nonprofits with a greater number of relationship ties, controlling for appropriate variables, will receive more funds from a government agency. Chapter 4 describes the methods used. The sample of organizations included 176 nonprofit community healthcare organizations over the span of five fiscal years. Board member names, financial and organizational data, and relationship ties were collected as they were expected to affect funding outcomes. Information on relationships was obtained from three sources: LinkedIn profiles, Who’s Who profiles, and agency websites. Financial and organizational variables were obtained from nonprofit organizations’ 990 tax forms. Chapter 5 details the analyses and the results from the collected data. Conducted analyses included a series of multiple regressions, a probit regression, and fixed-effects and between-effects panel data regression models. The findings partially supported the hypothesis. While there were some relationship ties that were correlated to anticipated funding, the effects were small across analyses. Financial and organizational variables overshadowed the effects of relationship ties. There was evidence of mediation in that a number of variables were significant only if board members were in an organization receiving funds prior to the examined time period. Ties to other nonprofits mattered only when an agency already had funding. Chapter 6 concludes with possible explanations, policy implications, and further directions.

This doctoral thesis contains three research papers in social finance, a field concerned with the financing issues of organizations aiming to solve social problems. Intertemporal Preferences of Nonprofit Organizations This paper studies the intertemporal preferences that govern the spending decision of nonprofit organizations. I estimate the subjective discount rate and the elasticity of intertemporal substitution based on an extension of the consumption Euler model that allows for heterogeneous parameter estimates with regards to donation dependency and size. Biting the Hand That Feeds You: Effects of Embezzlement in Nonprofits This paper studies how newspaper reports on embezzlement affect donations received by nonprofit organizations. Based on a unique data set on wrongdoings by top managers in nonprofits between 1995 and 2002, I provide evidence that the cost of weak governance in nonprofits is very high. What is the Business of Business? This paper develops a theoretical framework for understanding the emergence of new organizational forms, such as socially responsible firms and social enterprises, which embody the private sector’s efforts to resolve problems that typically have been within the purview of government and traditional charities. The framework yields an optimal investment policy, which typically Pareto-dominates many common social investment principles, such as break-even conditions, social screening and SROI. About the author Andreas Nilsson pursued his PhD in the Department of Finance at the Stockholm School of Economics. During this time, he was affiliated with the Swedish House of Finance and SIFR and spent two years as a visiting fellow at Harvard University. He is the founder of Sonanz, an asset management firm focused on social investments. / <p>Diss. Stockholm : Handelshögskolan, 2014. Sammanfattning jämte 3 uppsatser</p>

The primary objective of this dissertation is to study the management of public and nonprofit resources and financial risk. Governments will be able to use its findings to continue to provide public services in collaboration with other sectors, including the nonprofit sector. Nonprofit financial self-sufficiency and sub-award grant mechanisms between the government and nonprofit sectors are two primary areas to be examined. This dissertation consists of three essays. The first investigates how the diversification of nonprofit revenue portfolios influences extreme revenue risks; the results show that the chance of extreme revenue loss increases when revenue sources are highly correlated to each other. The second essay examines the impact of strenuous state fiscal conditions on nonprofit organizations based in different U.S. states in order to report on generalizable empirical research on sub-award grant mechanisms, state and local government grants awarded to nonprofit organizations. The third essay explores the nonprofit sector’s response to economic shocks, and whether specific state characteristics intensified or mitigated the impact of the economic crisis. The findings from this dissertation can help nonprofit-sector scholars and practitioners understand different perspectives of market risk, revenue risk and portfolio development, and financial stability related to government grants.

Indiana University-Purdue University Indianapolis (IUPUI) / This dissertation consists of two essays on nonprofit finance. Nonprofit finance concerns obtaining and managing financial resources to support the social purposes of nonprofit organizations. A unique feature of nonprofit finance is that nonprofits derive revenue from a variety of sources. Nonprofit finance thus involves answering two fundamental questions: What is the optimal combination of revenue sources that supports a nonprofit to achieve its mission? Where and how to obtain the revenue sources? The two dissertation essays address these two questions respectively. The first essay, titled “Modern Portfolio Theory and the Optimization of Nonprofit Revenue Mix,” is among the first to properly apply modern portfolio theory (MPT) from corporate finance to nonprofit finance. By analyzing nonprofit tax return data, I estimate the expected return and risk characteristics for five nonprofit revenue sources as well as the correlations among these returns. I use the estimates to identify the efficient frontiers for nonprofits in different industries, based on which nonprofit managers can select an optimal portfolio that can minimize the risk given a preferred level of service provision or maximize the return given a level of risk. The findings also pose a challenge to the predominant approach used in previous nonprofit finance studies (Herfindahl-Hirschman Index) and suggest that MPT is theoretically and practically more helpful in guiding nonprofit revenue management. The second essay, titled “Charitable Giving in Nonprofit Service Associations: Identities, Incentives, and Gender Differences,” concerns nonprofit resource attainment, specifically, how do decisionmaking contexts and framing affect donations. Membership in a service club is characterized by two essential elements: members’ shared interest in the club’s charitable mission; and private benefits that often come as a result of social interactions with other members, such as networking, fellowship, and fun. A laboratory experiment was designed to examine 1) whether membership in a service club makes a person more generous and 2) the effect of service club membership—stressing either the service or socializing aspects—on individual support for collective goods. The study finds that female individuals are the least generous when they are reminded of the socializing aspect of service-club membership.