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Career concerns and accounting performance measures in nonprofit organizations

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  • Arya, Anil
  • Mittendorf, Brian

Abstract

Many in the nonprofit sector view accounting-based performance measures to be overly influential and counterproductive in the evaluation of charities and their leaders. The contention is that such measures are imperfect and often biased, leading to dysfunctional rationing of fundraising and administrative infrastructure. To examine these concerns and the broader question of nonprofit executive incentives, we develop a model of nonprofit executives who are concerned with influencing external perceptions. In doing so, we demonstrate that accounting-based performance measures alter executive incentives in critical ways. In particular, disclosure of the functional classification of nonprofits’ expenses can reduce incentives to overinvest in fundraising and restore investments in programs; at the same time, it also comes with the potential downside of undermining key investments in long-term infrastructure.

Suggested Citation

  • Arya, Anil & Mittendorf, Brian, 2015. "Career concerns and accounting performance measures in nonprofit organizations," Accounting, Organizations and Society, Elsevier, vol. 40(C), pages 1-12.
    • Handle: RePEc:eee:aosoci:v:40:y:2015:i:c:p:1-12
    DOI: 10.1016/j.aos.2014.10.002
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    References listed on IDEAS

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    Cited by:

    1. Kopel, Michael & Marini, Marco A., 2022. "Mandatory disclosure of managerial contracts in NGOs," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 65-85.
    2. Maged Albaz & Mohamed Mostafa Ali Albaz, 2019. "Core Perspectives Of Performance Measurement In Npos: In Search Of Accountability And Legitimacy," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 3 Year 20, pages 3-16.
    3. Jussila Hammes , Johanna, 2017. "The impact of career concerns and cognitive dissonance on bureaucrats’ use of cost-benefit analysis," Working papers in Transport Economics 2017:5, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    4. Clerkin, Brendan & Quinn, Martin, 2021. "Institutional agents missing in action?: Management accounting at non-governmental organisations," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 80(C).
    5. Akshay Mutha & Saurabh Bansal & V. Daniel R. Guide, 2021. "Managing the Inter‐Functional Tension between Accounting‐ and Financial‐Profits in Remanufacturing Multiple‐Usecycle Products," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2993-3014, September.
    6. Smith, Michael, 2022. "Monetizing virtuous employees," Accounting, Organizations and Society, Elsevier, vol. 98(C).

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