On the association between donor-imposed financial inflexibility and future donations to charitable organizations

Krishnamurthy Surysekar, Elizabeth H. Turner, Clark M. Wheatley

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

We address the impact of financial flexibility on organizational performance in a not-for-profit (NFP) setting. Specifically, we examine the link between donorimposed financial inflexibility and subsequent donations. Donors sometimes impose restrictions on NFP use of the donated resources. These restrictions arise because of donors’ preferences regarding how the assets are used, or as a mechanism for donors to monitor the actions of NFP management. Restricted donations cause financial inflexibility and limit managerial discretion. We examine the costs and benefits of restricting managerial discretion and find a negative relation between future donations and high levels of donor restriction. Specifically, we empirically demonstrate that when restricted assets comprise a high percentage of total assets, additional increases in restricted assets are associated with an overall reduction in future donations.

Original languageEnglish (US)
Pages (from-to)63-79
Number of pages17
JournalJournal of Management Accounting Research
Volume27
Issue number1
DOIs
StatePublished - Mar 2015
Externally publishedYes

Keywords

  • Financial flexibility
  • Not-for-profit
  • Performance
  • Restricted assets

ASJC Scopus subject areas

  • Business and International Management
  • Accounting

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