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Multiple Information Signals in the Market for Charitable Donations

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  • Erica E. Harris
  • Daniel G. Neely

Abstract

We find evidence indicating that donors use third†party rating information when they donate to U.S. nonprofit organizations (nonprofits). Specifically, using a sample of over 3,800 unique nonprofits rated by the three largest charity rating organizations in 2007, and over 12,000 unrated control nonprofits, we find that rated nonprofits have significantly higher direct donations than unrated charities. We also hypothesize and find that nonprofits with ratings from multiple rating organizations receive incrementally higher levels of donations. In addition, although charities that receive a positive rating have higher levels of donor support than those receiving a negative rating, both positively and negatively rated nonprofits receive a higher level of direct donations than unrated nonprofits. Finally, we find that nonprofits with consistently good ratings receive higher donations than those with mixed or consistently negative ratings, indicating the donor community values consistency across the three rating agencies.

Suggested Citation

  • Erica E. Harris & Daniel G. Neely, 2016. "Multiple Information Signals in the Market for Charitable Donations," Contemporary Accounting Research, John Wiley & Sons, vol. 33(3), pages 989-1012, September.
    • Handle: RePEc:wly:coacre:v:33:y:2016:i:3:p:989-1012
    DOI: 10.1111/1911-3846.12175
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    Cited by:

    1. Tsang, Albert & Frost, Tracie & Cao, Huijuan, 2023. "Environmental, Social, and Governance (ESG) disclosure: A literature review," The British Accounting Review, Elsevier, vol. 55(1).
    2. Elka Johansson & Peter Carey & George Tanewski & Iliyas Yusoff, 2022. "The effect of members on charities’ annual reporting: evidence from companies limited by guarantee in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1851-1886, April.
    3. Lin Zhijun & Li Ying, 2020. "Examining the Relationship between Different Types of Information Disclosure of Foundations and Chinese Donations," Nonprofit Policy Forum, De Gruyter, vol. 11(3), pages 1-21, October.
    4. Gregory D. Saxton & Daniel G. Neely, 2019. "The Relationship Between Sarbanes–Oxley Policies and Donor Advisories in Nonprofit Organizations," Journal of Business Ethics, Springer, vol. 158(2), pages 333-351, August.
    5. José Miguel Tirado-Beltrán & Iluminada Fuertes-Fuertes & J. David Cabedo, 2020. "Donor Reaction to Non-Financial Information Covering Social Projects in Nonprofits: A Spanish Case," Sustainability, MDPI, vol. 12(23), pages 1-17, December.
    6. Zachary Halberstam & James R. Hines Jr., 2023. "Quality-Aware Tax Incentives for Charitable Contributions," CESifo Working Paper Series 10250, CESifo.
    7. Erica E. Harris & Daniel G. Neely & Gregory D. Saxton, 2023. "Social media, signaling, and donations: testing the financial returns on nonprofits’ social media investment," Review of Accounting Studies, Springer, vol. 28(2), pages 658-688, June.
    8. Ziqin Yu & Xiang Xiao, 2022. "Innovation information disclosure and stock price crash risk‐based supervision and insurance effect path analysis," Australian Economic Papers, Wiley Blackwell, vol. 61(3), pages 534-590, September.
    9. Alexander, Anna & Pilonato, Silvia & Redigolo, Giulia, 2023. "Do institutional donors value social media activity and engagement? Empirical evidence on Italian non-profit grantees," The British Accounting Review, Elsevier, vol. 55(5).
    10. Raphael Duguay, 2022. "The Economic Consequences of Financial Audit Regulation in the Charitable Sector," Journal of Accounting Research, Wiley Blackwell, vol. 60(4), pages 1463-1498, September.
    11. Dominic Cyr & Suzanne Landry & Anne Fortin, 2023. "Financial Disclosure Management by Charitable Organisations: A Conceptual and Operational Framework," Australian Accounting Review, CPA Australia, vol. 33(1), pages 46-65, March.

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