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


  • Mihir A. Desai
  • Robert J. Yetman


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
    Note: CF PE

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    References listed on IDEAS

    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.
    2. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    3. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    4. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
    5. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
    6. Pauly, Mark V & Redisch, Michael, 1973. "The Not-For-Profit Hospital as a Physicians' Cooperative," American Economic Review, American Economic Association, vol. 63(1), pages 87-99, March.
    7. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
    8. Hamermesh, Daniel S, 1982. "Social Insurance and Consumption: An Empirical Inquiry," American Economic Review, American Economic Association, vol. 72(1), pages 101-113, March.
    9. repec:hrv:faseco:33078971 is not listed on IDEAS
    10. 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.
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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. repec:bla:acctfi:v:57:y:2017:i:1:p:131-164 is not listed on IDEAS
    3. 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.

    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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