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Revenue Structure and Nonprofit Borrowing

Author

Listed:
  • Wenli Yan

    (Indiana University-Bloomington)

  • Dwight V. Denison

    (University of Kentucky)

  • J.S. Butler

    (University of Kentucky)

Abstract

The capital structure of nonprofit organizations plays a crucial role in their sustainability and development. This article explores the extent to which revenue diversification is incorporated into the leverage decision. In addition, this study investigates whether government grants have an impact on the long-term liabilities of nonprofit organizations. A model of nonprofit borrowing is proposed and examined with a national sample of arts, culture, and humanities nonprofit organizations. Model estimates show that nonprofit organizations with higher degree of revenue diversification are more likely to issue debt, but do not necessarily have higher debt ratios. Arts organizations with more government financial support are also more likely to issue debt and to have higher leverage ratios.

Suggested Citation

  • Wenli Yan & Dwight V. Denison & J.S. Butler, 2009. "Revenue Structure and Nonprofit Borrowing," Public Finance Review, , vol. 37(1), pages 47-67, January.
    • Handle: RePEc:sae:pubfin:v:37:y:2009:i:1:p:47-67
    DOI: 10.1177/1091142108321239
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    References listed on IDEAS

    as
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    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
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    4. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    5. Wedig, Gerard J & Hassan, Mahmud & Morrisey, Michael A, 1996. "Tax-Exempt Debt and the Capital Structure of Nonprofit Organizations: An Application to Hospitals," Journal of Finance, American Finance Association, vol. 51(4), pages 1247-1283, September.
    6. Clingermayer, James C. & Dan Wood, B., 1995. "Disentangling Patterns of State Debt Financing," American Political Science Review, Cambridge University Press, vol. 89(1), pages 108-120, March.
    7. repec:bla:jfinan:v:43:y:1988:i:1:p:21-40 is not listed on IDEAS
    8. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, vol. 37(1), pages 39-65, January.
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    Cited by:

    1. Rosen, Harvey S. & Sappington, Alexander J.W., 2016. "To borrow or not to borrow? An analysis of university leverage decisions," Research in Economics, Elsevier, vol. 70(1), pages 170-185.
    2. Nathaniel S. Wright & Tony G. Reames, 2020. "Unraveling the Links between Organizational Factors and Perceptions of Community Sustainability Performance: An Empirical Investigation of Community-Based Nongovernmental Organizations," Sustainability, MDPI, vol. 12(12), pages 1-20, June.
    3. Berta SILVA & Ronelle BURGER, 2015. "Financial vulnerability: an empirical study of Ugandan NGOs," CIRIEC Working Papers 1515, CIRIEC - Université de Liège.
    4. Domański Jarosław, 2016. "Risk Categories and Risk Management Processes in Nonprofit Organizations," Foundations of Management, Sciendo, vol. 8(1), pages 227-242, January.

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