Determinants of saving: a study of U.S. non-profit organizations
Seidman College of Business
Nonprofit organizations carry out a range of activities from human charitable services to services related to education, religion, health care, and art and culture. Although, in principle, nonprofit organizations should spend their income to serve the users of their services, they often allocate a portion of their income to saving in order to generate steady stream of future income and store wealth to increase their survivability in the event of unexpected market downturn. According to general economic principles, non-profit organizations should save to generate income (financial returns), to avoid volatility in program expenses (consumption smoothing), and to increase the probability of future survival (precautionary saving). There are trade-offs, though: saving reduces the amount spent on program services and might reduce the amount of grants and public support received (as governments and the public might look at the organization needs). Because greater risk averseness leads to more saving, organizations that have less predictable revenue sources (public support) should save more to compensate the risk of insufficient revenues in the future, while having more predictable revenue sources (government grants and service fees) should induce less saving. Organizations that depend more on financial returns should, of course, accumulate greater saving. Our analysis shows that saving increases with greater dependence on public support, member dues, returns from investment assets, and with higher organizational efficiency, but decrease with dependence on government grants, service fees, and with dedication to social needs.
Midwest Economic Association Meeting
St Louis, MO
Ogura, Laudo, "Determinants of saving: a study of U.S. non-profit organizations" (2010). Faculty Scholarly Dissemination Grants. 123.