Nonprofit expense management and the zero-profit threshold

Purpose In a wide variety of settings, individuals target round-numbered thresholds, relaxing effort when they are out of reach. This paper aims to investigate whether this phenomenon occurs in nonprofits as well. Design/methodology/approach The paper empirically examines nonprofits’ propensity to cut expenses relative to the attainability of the zero-profit threshold. Findings This paper finds nonprofit firms are more likely to cut expenses when faced with small expected losses than with larger losses, and this pattern varies predictably with incentives to reach the zero-profit threshold. Research limitations/implications This suggests managers are motivated by desire to reach the zero-profit threshold rather than to improve firms’ economic situations, as the propensity to cut expenses is lower when the threshold is out of reach. Social implications Additionally, the results suggest that even the lack of explicit profit motive may not quell earnings management behavior. Originality/value These results begin to close the gap in our understanding of expense management in nonprofit firms, showing how operating expenses can be used to manage earnings.

How Do Nonprofit Firms Respond to Tax Policy?

We investigate the effects of variations in the value of the charitable contribution deduction on nonprofit firm behavior, including exploring for the first time the effects of the tax price of giving on fund-raising. We find that a 1 percent increase in tax subsidies is correlated with a 2.0 percent increase in fund-raising, while the elasticity of real charitable output to changes in tax price is less than one in absolute value for most firms. We derive a new equation for treasury efficiency in the presence of fund-raising and find that while our point estimates still support treasury efficiency, our confidence intervals are wide enough to allow some possibility that the deduction is not cost effective. Further, the modest elasticity of charitable output to tax price implies that tax subsidies can crowd out other revenue sources, such that the efficacy of the subsidy depends on the relative efficiency of these alternative sources.

The relationship between innovation and performance in special nonprofit firms: Social and cooperative agrifood firms

Firms are continually trying to identify innovation sources in order to improve organizational performance, but the identification of such origins is a complex and poorly understood issue, particularly as far as nonprofit firms are concerned. The social and cooperative agrifood arrangement has become one of the main and newest types of nonprofit organization in China since the implementation of the law related to specialized cooperatives, on July 1, 2007. In this research, a conceptual model is proposed to show that the characteristics of innovative sources can determine a firm’s absorptive capacity, which in turn can impact its performance. Therefore, absorptive capacity can be expected to enable the mediation of the relationships of innovative sources with the performance of firms. By means of theoretical analysis and practical investigation, this paper provides an assessment of the use of innovation sources and finds critical factors that may foster competitive and sustainable advantages.