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

Author

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  • Thad D. Calabrese
  • Anubhav Gupta

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.

Suggested Citation

  • Thad D. Calabrese & Anubhav Gupta, 2019. "A Replication of “Agency Problems of Excess Endowment Holdings in Not-for-profit Firms†(Journal of Accounting and Economics, 2006)," Public Finance Review, , vol. 47(4), pages 747-774, July.
    • Handle: RePEc:sae:pubfin:v:47:y:2019:i:4:p:747-774
    DOI: 10.1177/1091142118765788
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    References listed on IDEAS

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    1. Andres Ramirez, 2011. "Nonprofit Cash Holdings," Public Finance Review, , vol. 39(5), pages 653-681, September.
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    Cited by:

    1. David Adeabah & Charles Andoh & Simplice A. Asongu & Isaac Akomea-Frimpong, 2021. "Elections, Political Connections and Cash Holdings: Evidence from Local Assemblies," Working Papers of the African Governance and Development Institute. 21/004, African Governance and Development Institute..

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