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Constraining Managers without Owners: Governance of the Not-for-Profit Enterprise

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  • Mihir A. Desai
  • Robert J. Yetman

Abstract

In the absence of owners, how effective are the constraints imposed by the state in promoting effective firm governance? This paper develops state-level indices of the legal and reporting rules facing not-for-profits and examines the effects of these rules on not-for-profit behavior. Stronger non-distribution constraints are associated with greater charitable expenditures and foundation payouts while more stringent reporting requirements are associated with lower insider compensation. The paper also examines how governance influences an alternative metric of not-for-profit performance -- the provision of social insurance. Stronger governance measures are associated with intertemporal smoothing of resources and greater activity in response to negative economic shocks.

Suggested Citation

  • Mihir A. Desai & Robert J. Yetman, 2005. "Constraining Managers without Owners: Governance of the Not-for-Profit Enterprise," NBER Working Papers 11140, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11140
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    References listed on IDEAS

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    1. James R. Hines Jr., 1999. "Non-Profit Business Activity and the Unrelated Business Income Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 57-84, National Bureau of Economic Research, Inc.
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    6. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    7. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-976, October.
    8. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Core, John E. & Guay, Wayne R. & Verdi, Rodrigo S., 2006. "Agency problems of excess endowment holdings in not-for-profit firms," Journal of Accounting and Economics, Elsevier, vol. 41(3), pages 307-333, September.
    2. Gregory O. Jobome, 2006. "Public Funding, Governance and Passthrough Efficiency in Large UK Charities," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(1), pages 43-59, January.
    3. Spiros Bougheas & Alessia Isopi & Trudy Owens, 2012. "How do Donors Allocate Funds to NGOs? Evidence from Uganda," Discussion Papers 12/08, University of Nottingham, CREDIT.
    4. Carolyn J. Cordery & Dalice Sim & Tony Zijl & Gary Monroe, 2017. "Differentiated regulation: the case of charities," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(1), pages 131-164, March.
    5. Dietz Nathan & Barber Putnam & Lott Cindy & Shelly Mary, 2017. "Exploring the Relationship between State Charitable Solicitation Regulations and Fundraising Performance," Nonprofit Policy Forum, De Gruyter, vol. 8(2), pages 183-204, September.
    6. Hofmann, Mary Ann & McSwain, Dwayne, 2013. "Financial disclosure management in the nonprofit sector: A framework for past and future research," Journal of Accounting Literature, Elsevier, vol. 32(1), pages 61-87.

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    More about this item

    JEL classification:

    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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