A Replication of “Agency Problems of Excess Endowment Holdings in Not-for-profit Firms” (Journal of Accounting and Economics, 2006)

Thad D. Calabrese, Anubhav Gupta

Research output: Contribution to journalArticlepeer-review

Abstract

Core, Guay, and Verdi explore whether excessive levels of cash (“endowments”) are associated with nonprofits’ growth in program spending and fixed assets, agency problems, or donors’ monitoring efforts. We replicate their finding that excess endowments are unrelated to growth in program spending. However, unlike the original article, we find that persistent excess endowments are associated with growth in fixed assets. Further, when we alter the model specification to better align with theory, we find excess endowments increase program expense ratios and lead to higher growth in program service spending as well as capital investment. We are also able to replicate the original article’s finding that excess endowments are related to higher CEO and management compensation. However, when we again alter the model specification, we find excess endowments are associated with compensation declines. Overall, we find weaker evidence of a relationship between excess endowments and agency problems than the original article.

Original languageEnglish (US)
Pages (from-to)747-774
Number of pages28
JournalPublic Finance Review
Volume47
Issue number4
DOIs
StatePublished - Jul 1 2019

Keywords

  • agency problems
  • cash holdings
  • corporate governance
  • endowment
  • nonprofit organizations

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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