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