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Agency Consequences of Government Funding in Nonprofit Organizations

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  • S. VERBRUGGEN
  • K. VLASSENROOT
  • J. CHRISTIAENS

Abstract

Nonprofit organizations often rely on governmental grants to finance their social programs. Under certain circumstances, the procurement of these grants causes an agency-relation between the board of directors and the management of the organization. Using archival data from a substantial number of nonprofit organizations’ financial statements, the influence of different types of government grants on the agency-relation between board and management is tested. The study reveals an increase in the agency-relationship depending on the level of efforts necessary to achieve the grants.

Suggested Citation

  • S. Verbruggen & K. Vlassenroot & J. Christiaens, 2011. "Agency Consequences of Government Funding in Nonprofit Organizations," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/711, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:11/711
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    References listed on IDEAS

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    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    2. Core, John E. & Guay, Wayne R. & Verdi, Rodrigo S., 2006. "Agency problems of excess endowment holdings in not-for-profit firms," Journal of Accounting and Economics, Elsevier, vol. 41(3), pages 307-333, September.
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