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Nonprofit boards: Size, performance and managerial incentives


  • Aggarwal, Rajesh K.
  • Evans, Mark E.
  • Nanda, Dhananjay


We examine relations between board size, managerial incentives and enterprise performance in nonprofit organizations. We posit that a nonprofit's demand for directors increases in the number of programs it pursues, resulting in a positive association between program diversity and board size. Consequently, we predict that board size is inversely related to managerial pay-performance incentives and positively with overall organization performance. We find empirical evidence consistent with our hypotheses. The number of programs is positively related to board size. Board size is associated negatively with managerial incentives, positively with program spending and fundraising performance, and negatively with commercial revenue, in levels and changes.

Suggested Citation

  • Aggarwal, Rajesh K. & Evans, Mark E. & Nanda, Dhananjay, 2012. "Nonprofit boards: Size, performance and managerial incentives," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 466-487.
  • Handle: RePEc:eee:jaecon:v:53:y:2012:i:1:p:466-487 DOI: 10.1016/j.jacceco.2011.08.001

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    References listed on IDEAS

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    4. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58.
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    6. Eldenburg, Leslie & Hermalin, Benjamin E. & Weisbach, Michael S. & Wosinska, Marta, 2004. "Governance, performance objectives and organizational form: evidence from hospitals," Journal of Corporate Finance, Elsevier, vol. 10(4), pages 527-548, September.
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    9. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    10. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 7-26.
    11. Eileen Appelbaum & Larry W. Hunter, 2004. "Union Participation in Strategic Decisions of Corporations," NBER Chapters,in: Emerging Labor Market Institutions for the Twenty-First Century, pages 265-292 National Bureau of Economic Research, Inc.
    12. Brickley, James A & Van Horn, R Lawrence, 2002. "Managerial Incentives in Nonprofit Organizations: Evidence from Hospitals," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 227-249, April.
    13. Eldenburg, Leslie & Krishnan, Ranjani, 2003. "Public versus private governance: a study of incentives and operational performance," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 377-404, August.
    14. 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.
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    Cited by:

    1. Iatridis, George Emmanuel, 2015. "Corporate philanthropy in the US stock market: Evidence on corporate governance, value relevance and earnings manipulation," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 113-126.
    2. Newton, Ashley N., 2015. "Executive compensation, organizational performance, and governance quality in the absence of owners," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 195-222.
    3. repec:kap:jculte:v:41:y:2017:i:3:d:10.1007_s10824-017-9290-4 is not listed on IDEAS

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    Nonprofits; Incentives; Boards of directors;


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