Financial reporting quality and price competition among nonprofit firms
AbstractDonors increasingly rely on financial information reported by Internal Revenue Service (IRS) Form 990 to allocate donations among nonprofit firms. However, competition among nonprofits creates an incentive for managers to under-report management and fund-raising expenditures to make their firms appear relatively efficient. Increasingly, researchers suspect that information provided in the Form 990 may not accurately portray the true financial condition of nonprofit firms. Inaccurate price information weakens the ability of donors to promote efficiency and discipline excess among nonprofit managers. This article examines the reaction of donors to variation in Form 990 reporting quality. We find that donors reward nonprofit firms for investments in more accurate financial reporting. Additionally, higher quality financial information sharpens the ability of donor markets to discipline nonprofit firms by increasing price sensitivity. The primary implication of this study is that regulatory improvements in reporting quality could increase the ability of donor markets to serve as a viable governance mechanism for improving nonprofit efficiency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Economics.
Volume (Year): 42 (2010)
Issue (Month): 21 ()
Contact details of provider:
Web page: http://www.tandf.co.uk/journals/routledge/00036846.html
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statistics
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.