The Downside to Nonprofit Riches: Are Donors Influenced by Nonprofits’ Available Financial Assets?

• In Event: Donors and Nonprofit Financial Reporting

Abstract

In this study, we examine whether a nonprofit’s available financial assets impact future donations received. Donors are motivated by a variety of reasons to contribute to nonprofit organizations and have differing views on how nonprofits should use their resources. While some donors may prefer organizations to provided for current societal needs, other donors may judge the strength of an organization based on their accumulated financial resources. We find that donors generally reduce their contributions to an organization as the organization’s available financial assets increase, especially when the organization provides basic human needs to society. Further, we find the donor penalty is lower for firms in competitive environments and those with significant revenue decreases. However, we find the donor penalty is greater in recessionary periods and societal needs are greater.

Authors

• Paul Anthony Wong, University of California-Davis

• Robert J Yetman, University of California-Davis