Do Donors Care About the Price of Giving? A Review of the Evidence, with Some Theory to Organise It

Wong, Jade; Ortmann, Andreas

doi:10.1007/s11266-015-9567-1

Cited by 23 publications

(17 citation statements)

References 52 publications

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“…Among the independent variables of the economic model of giving (Weisbrod & Dominguez, 1986), we operationalized lnPrice i , t as the cost to a donor of purchasing one dollar of output for an organization's beneficiaries. We measured it as

\frac{1}{italicprogram expenses : italictotal expenses}

and it took into account that the nonprofit could devote resources to programs only after incurring expenditures on fundraising and general administration (Trussel & Parsons, 2008; Wong & Ortmann, 2016). In their literature review, Jacobs and Marudas (2009) highlighted a substantial amount of evidence that shows price is negatively associated with donations to the United States, United Kingdom, and Canadian nonprofits.…”

Section: Methodsmentioning

confidence: 99%

“…Conversely, donors may view organizational expenditure on fundraising as a diversion of resources from programs, thus increasing the perceived price of program spending (Ashley & Faulk, 2010; Gneezy, Keenan, & Gneezy, 2014). Lastly, donors care about the price of their contributions because they want their donations to maximize charitable output (Wong & Ortmann, 2016). To gain better evidence of the factors that affect donations, Jacobs and Marudas (2009) suggested that the model should consider the combined effect of price and administrative expenses because this approach reduces the problem of omitting correlated variables of efficiency/inefficiency.…”

Section: Literature Reviewmentioning

confidence: 99%

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The more you know, the more you give: Influence of online disclosure on European community foundations' donations

Rossi

Leardini

Landi

2020

Nonprofit Mgmnt & Ldrshp

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Competition is high in the charitable contributions market, and donors demand to know how nonprofit organizations use the money they receive. In scrutinizing the variables that affect the capacity of nonprofits to attract donations, previous research has highlighted the positive influence of the amount of financial and performance information that nonprofits disclose through their websites. This study explored whether the depth of the organizations' online disclosures also affects these donations. In line with existing studies on regression‐based economic models of giving, this study considered community foundations—focusing on the United Kingdom and Italy—and its results indicated that managing the depth of the information provided through financial reports can influence donors' sensitivity and willingness to donate.

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\frac{1}{italicprogram expenses : italictotal expenses}

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

The more you know, the more you give: Influence of online disclosure on European community foundations' donations

Rossi

Leardini

Landi

2020

Nonprofit Mgmnt & Ldrshp

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“…In response to the shortcomings of organizational-level studies, scholars have increasingly focused on the impact of financial ratios on giving from an individual-level perspective, and done so through either survey or experimental methods. The second relevant stream therefore constitutes a more practitioner-oriented set of survey studies conducted to capture donor expectations toward financial ratios and their relevance for giving decisions (for a recent review,see Wong & Ortmann, 2016). Overall, surveys have delivered mixed results (Bagwell et al, 2013; Barclays Wealth, 2010; Grey Matter Research, 2018).…”

Section: Background and Prior Literaturementioning

confidence: 99%

If Someone Else Pays for Overhead, Do Donors Still Care?

Charles

Sloan

Schubert

2020

The American Review of Public Administration

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To better evaluate the effectiveness of overhead-free donations on giving behavior, we seek to further investigate the robustness of the findings from Gneezy et al. using a nonstudent population. In an online experiment, we test whether (a) the level of overhead costs affects giving decisions and whether (b) overhead aversion disappears once donors are informed that an anonymous donor has already covered all overhead costs. Results show that donations decrease as overhead spending increases when donors have to pay for overhead. However, unlike the original article, we find mixed results when someone else covered overhead costs. Participants exposed to a nonprofit with a 33% overhead ratio where overhead was already covered still displayed overhead aversion. However, this aversion disappeared at a high overhead ratio of 67%. The overall results remain unchanged after controlling for demographics. Our results hold important implications for nonprofit organizations who must find a careful balance between appealing to donors for short-term financial gain and addressing the need to alter skewed donor expectations toward financial efficiency in the long run.

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“…In this way, higher administrative costs ratios signal higher levels of inefficiency and waste, which are perceived negatively by donors and other constituents such as donors and watchdog organizations. Gneezy et al (2014) termed this phenomenon “overhead aversion.” Indeed, empirical research documents that nonprofits with high levels of administrative costs ratios receive less private donations and constituent support (Bowman, 2006; Sloan, 2009; Tinkelman & Mankaney, 2007; Wong & Ortmann, 2016).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

“…The authors of both studies determined that their findings were inconclusive and called for more future research. However, to our knowledge, there are no later empirical studies that address the relationship between nonprofits’ administrative costs and government funding, even though the research on nonprofit overhead costs and efficiency ratios has flourished in recent years (e.g., Charles, 2018; Ecer et al, 2017; Gneezy et al, 2014; Parsons et al, 2017; Wong & Ortmann, 2016).…”

Section: Introductionmentioning

confidence: 99%

Does Government Punish Nonprofits for High Administrative Costs in Contracting Decisions?

Zhao

2019

The American Review of Public Administration

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As government financing of nonprofit organizations to deliver services and implement policies has become a common practice in the public administration landscape, the question of what factors affect government’s source selection has emerged as a significant one. Within this strand of research, how nonprofits’ administrative costs affect their receipt of government contracts is still not fully understood. This article explores that relationship using a large panel data set of U.S.-based international development nonprofits from 1967 to 2014. Different model specifications consistently demonstrate an inverted U-shaped relationship between a nonprofit’s level of administrative costs and its amount of government contracts. In particular, as a nonprofit’s level of administrative costs increases, its amount of government contracts will initially increase, but after its level of administrative costs reaches approximately 16% to 18% of total expenses, further increases in the nonprofit’s level of administrative costs will reduce its amount of government contracts. These findings have implications for both public and nonprofit management.

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Do Donors Care About the Price of Giving? A Review of the Evidence, with Some Theory to Organise It

Cited by 23 publications

References 52 publications

The more you know, the more you give: Influence of online disclosure on European community foundations' donations

The more you know, the more you give: Influence of online disclosure on European community foundations' donations

If Someone Else Pays for Overhead, Do Donors Still Care?

Does Government Punish Nonprofits for High Administrative Costs in Contracting Decisions?

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