Financing constraints in nonprofit organisations: A 'Tirolean' approach
For the first time a stylised model, in the tradition of corporate finance models for profit organisations described by Tirole (2006), is developed in order to understand the existence of financial constraints in nonprofit organisations and their relationship with the presence of agency problems. Financial constraints can be expected to arise when there are no substantial opportunities to increase revenues from fundraising and when nonprofit managers might not be willing to exert high fundraising efforts. Furthermore, under these circumstances more agency problems lead to lower debt levels. In situations without expected financial constraints, more agency problems are shown to go together with higher debt levels. Extending watchdog agencies' assessment methods to include default payments can limit or even eliminate financial constraints. The model also allows to understand why larger and chain affiliated organisations should suffer less from financing constraints. The very scant empirical literature's findings on the matter are shown to be reconcilable with the model's predictions.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Richard Steinberg, 1986. "The Revealed Objective Functions of Nonprofit Firms," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 508-526, Winter.
- Sloan, Frank A. & Valvona, Joseph & Hassan, Mahmud & Morrisey, Michael A., 1988. "Cost of capital to the hospital sector," Journal of Health Economics, Elsevier, vol. 7(1), pages 25-45, March.
- Wedig, Gerard J., 1994. "Risk, leverage, donations and dividends-in-kind: A theory of nonprofit financial behavior," International Review of Economics & Finance, Elsevier, vol. 3(3), pages 257-278.
When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:17:y:2011:i:3:p:640-648. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.