Commercial Activity as Insurance: the Investment Behavior of Non-Profit Firms
AbstractWe 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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Bibliographic InfoPaper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2006/14.
Length: 39 pages
Date of creation: Jul 2006
Date of revision:
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
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
Other versions of this item:
- John Bennett & Elisabetta Iossa & Gabriella Legrenzi, 2003. "Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms," Public Policy Discussion Papers 03-26, Economics and Finance Section, School of Social Sciences, Brunel University.
- John Bennett & Elisabetta Iossa & Gabriella Legrenzi, 2003. "Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms," Economics and Finance Discussion Papers 03-26, Economics and Finance Section, School of Social Sciences, Brunel University.
- 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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