Nonprofit Arts Organizations: Debt Ratio Does Not Influence Donations—Interest Expense Ratio Does

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8 Scopus citations

Abstract

Due to increased competition for scarce resources, scholars and practitioners have been devoting more attention to identifying the factors that drive private contributions to nonprofit organizations in recent years. This study aims to investigate whether capital structure decisions made by nonprofit managers have an impact on future contributions from individual donors. More specifically, it asks whether debt is associated with a reduction in future financial support. This study relies on data derived from the DataArts Cultural Data Profile to answer this question. It utilizes a log-log model where the dependent variable is defined as total private contributions in the current period. Results indicate that an increase in the interest expense to total expense ratio is associated with a decrease in future contributions. A nonprofit’s debt to assets ratio, however, does not have a statistically significant impact on future contributions.

Original languageEnglish (US)
Pages (from-to)659-667
Number of pages9
JournalAmerican Review of Public Administration
Volume48
Issue number7
DOIs
StatePublished - Oct 1 2018

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Public Administration
  • Marketing

Keywords

  • capital structure
  • debt
  • donations
  • nonprofit
  • philanthropy

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