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Commercial Activity as Insurance: the Investment Behavior of Non-Profit Firms

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Author Info
John Bennett () (Brunel University)
Elisabetta Iossa () (CMPO University of Bristol)
Gabriella Legrenzi () (Keele University, Centre for Economic Research and School of Economic and Management Studies)

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Abstract

We provide a new rationale for commercial activities by non-profit organizations (NPOs) whose primary concern is to supply mission output. We show that investment in commercial activity may be used to insure mission output against the uncertainty of donations, though possibly at the cost of lower expected mission output. In this case, the amount of commercial investment is positively related to the variance of donations and to the degree of risk aversion. These predictions are corroborated by empirical tests on data from NPOs operating in the state of New York.

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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0614.pdf
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Publisher Info
Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2006/14.

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Length: 39 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:kee:kerpuk:2006/14

Note: Bennett and Iossa acknowledge gratefully financial support from the ESRC under grant R/000/22/3811.
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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
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Web page: http://www.keele.ac.uk/depts/ec/cer/
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

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Related research
Keywords: Insurance; investment; non-profit organisations.;

Other versions of this item:

Find related papers by JEL classification:
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Avner Ben-Ner, . "For-Profit, State, and Nonprofit: How to Cut the Pie Among the Three Sectors," Working Papers 0304, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
  2. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  3. Gentry, William M., 2002. "Debt, investment and endowment accumulation: the case of not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 21(5), pages 845-872, September. [Downloadable!] (restricted)
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