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Safety First or Safety Net?: Financial Performance and Risk Taking in Nonprofit Organizations

Sat, November 19, 8:15 to 9:45am, Hyatt Regency Capitol Hill, Yosemite

Abstract

Poor financial performance motivates for-profits to take risks. We argue that when faced with multiple goals, nonprofit managers in a financially robust organization will prioritize long-term goals, in other words risky goals with uncertain outcomes, over short-term gains. The non-distribution constraint will shape the performance-risk dynamic in nonprofits. To test our propositions, we combine two unique data sets to create a panel of U.S. nonprofit hospitals between 2008 and 2010. Managerial priority measures are derived from an original hospital CEO survey and matched with financial performance predictors and organizational controls derived from AHA.

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