Nonprofit organizations (NPO) rely on a diverse mix of revenue sources. The existing literature mainly supports diversification among different revenue sources as desirable because it enables organizational stability. Using a new data set of over 200 Swiss fundraising charities, we prove the opposite to be true: organizations that displayed a higher degree of revenue concentration grew stronger between 2005 and 2012. We identify factors influencing the organization’s capital and revenue structure. These factors can be divided into “nature” and “nurture” factors, which allows us to demonstrate which of them may be actively influenced by an organization’s management and which stem from conditions of the organization that cannot be readily overcome by managerial interventions (such as age, size, and legal form). Revenue concentration is positively influenced both by an organization’s geographical range of activity and dependence on its primary revenue source, and negatively influenced by board size and diversity.

In their pursuit of value creation, charitable foundations are mission-rather than profit-driven. Therefore, foundations are also mission-driven investors. We explore the effects of mission-driven portfolio selection based on three model foundations, representing common fields of activity in Switzerland. Employing a moving block bootstrap approach, we simulate time series. Based on these model foundations and under the integration of qualitative company rating data, such as environmental, social, and governance-related characteristics (ESG), we find both negative and no significant financial effects of portfolio screening. However, screening portfolios substantially increases mission-driven portfolio quality. Additionally, screening reduces reputational risks and even leptokurtic return characteristics under special consideration of governance issues. After a joint analysis of financial and qualitative factors for portfolios with equity shares of 25% and 50%, we did find strong enough evidence to encourage foundations to implement negative and positive screening criteria. Additionally, we argue that without the integration of mission-based qualitative criteria, for instance, the involvement in business activities contradicting the foundation's mission, an adequate evaluation of investment opportunities' desirability is not feasible.

No abstract