The Accumulation of Nonprofit Profits: A Dynamic Analysis

Research output: Contribution to journalArticle

Abstract

Notwithstanding its importance as an internal source of financing, no analysis has examined why nonprofits choose to retain unrestricted net assets. As restricted net assets might not be used as desired by the nonprofit manager, unrestricted net assets are a more accurate definition of available internal resources than total net assets. This article tests several theories that might motivate nonprofit accumulation of unrestricted net assets. Furthermore, the empirical strategy employed allows an analysis of unrestricted net asset accumulation over time and overcomes several significant statistical estimation issues. The results suggest that nonprofits target profits and seek their accumulation over time, although targets may be set at very low levels. Furthermore, the results suggest that the low levels of profits accumulated annually are for the purpose of reducing organizational financial vulnerability. The results also suggest that many nonprofits behave as if leverage and unrestricted net assets are substitutes.

Original languageEnglish (US)
Pages (from-to)300-324
Number of pages25
JournalNonprofit and Voluntary Sector Quarterly
Volume41
Issue number2
DOIs
StatePublished - Apr 2012

Keywords

  • financial management
  • nonprofit accounting
  • nonprofit organizations

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)

Fingerprint Dive into the research topics of 'The Accumulation of Nonprofit Profits: A Dynamic Analysis'. Together they form a unique fingerprint.

  • Cite this