Is Bigger Really Better?

Woronkowicz, Joanna

doi:10.1002/nml.21209

Cited by 6 publications

(10 citation statements)

References 18 publications

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“…As we have already commented, this study constitutes only a first step, so further research should continue this line of study, analyzing whether these differences in the capital structure involve different levels of efficiency, fundraising, or public funding. For example, Woronkowicz () shows an inverse relation between the debt level and the surplus ratio in the United States, but it would be interesting to study this relation in several countries simultaneously. Finally, researchers should not forget that the study of the determinants of NPOs’ capital structure is still inconclusive, so in‐depth analyses of a sole country are absolutely necessary.…”

Section: Discussionmentioning

confidence: 99%

Capital Structure of Nongovernmental Development Organizations

García-Rodríguez

Jegers

2017

Nonprofit Mgmnt & Ldrshp

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In the first international study of this kind, we analyze the capital structure of 364 nongovernmental development organizations ( NGDOs ) from three different countries: Belgium, Spain, and the United Kingdom. We observe lower debt ratio values in the United Kingdom, and significant differences between countries were found by testing an econometric model with the five classical determinants of leverage, considering total debt and both long-and short-term debt. We find support for the pecking order theory, and we broadly discuss some possible reasons for the obtained differences.CAPITAL STRUCTURE REFLECTS THE MAIN fi nancing decision of organizations: choosing between equity and debt. In the nonprofi t sector, research has mainly followed previous research from the for-profi t sector, starting some decades later than in the corporate fi eld. Some limitations must be dealt with, such as the absence of international databases and, in general, the problematic access to the necessary information.This study focuses on a particular subsector of the nonprofit field, analyzing nongovernmental development organizations (NGDOs). In Europe, these are the organizations that work in the nonprofit subsector of the international cooperation and development, trying to improve the living conditions of developing countries. NGDOs receive a portion of the Official Development Assistance (ODA) from national governments, as well as significant donations from individuals. However, the recent economic and financial crisis had a huge impact on these nonprofit organizations (NPOs): some countries reduced their ODA; household income problems threatened private donations; and credit restrictions limited the available financing alternatives of organizations. All these problems have meant a critical financial scenario for these NPOs, so their leverage decisions become more relevant and their study more important. Furthermore, the literature on financial vulnerability of NPOs has emphasized the importance of the ratio of debt to total assets, as the more in debt, the more vulnerable (Andres-Alonso, Garcia-Rodriguez, and Romero-Merino 2016 ;Trussel 2002 ). In fact, higher debt ratio values had a negative impact during the financial crisis (Lin and Wang 2016 ).

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Section: Discussionmentioning

confidence: 99%

Capital Structure of Nongovernmental Development Organizations

García-Rodríguez

Jegers

2017

Nonprofit Mgmnt & Ldrshp

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“…Therefore, this study offers additional support to the existing literature on fundraising effects by demonstrating that contributions to nonprofits are positively associated with fundraising performance (Twu ), and that fundraising activities at one nonprofit can affect the overall distribution of resources among neighboring nonprofits (Lyons ; Omura and Forster ). Further, this study is one of two studies that examines the effects of bricks‐and‐mortar construction projects on nonprofit financial performance (Woronkowicz ).…”

Section: Discussionmentioning

confidence: 99%

“…Pierpont () has examined the structure and process of capital campaigns. Woronkowicz () examines the effects of nonprofit facilities projects on financial vulnerability and finds that, for organizations that build new facilities, capital financing can potentially have adverse impacts on overall financial vulnerability, though it is unclear whether these effects are long term. To date, however, no study has examined the impact of large capital campaigns on the fundraising success of other nonprofit organizations, and studies of how (and whether) the fundraising activity of one nonprofit affects the success of another nonprofit in the same market (Lyons ; Omura and Forster ; Twu ) have produced mixed results.…”

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confidence: 99%

The Effects of Capital Campaigns on Other Nonprofits’ Fundraising

Woronkowicz

Nicholson‐Crotty

2017

Nonprofit Mgmnt & Ldrshp

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Keywords: capital campaign , fundraising , artsCAPITAL CAMPAIGNS HAVE THE GOAL of attracting large amounts of funds in short periods of time (Pierpont 2011 ). Thus capital campaigns are qualitatively different from annual drives or the near-constant cultivation of donations that organizations rely on to maintain operational and programmatic activities. As a result of these differences, campaigns can be potentially disruptive to the natural distribution of funds to area nonprofits by disproportionately directing area donations to a single organization.The literature explicitly on capital campaigns is quite limited. Pierpont ( 2011 ) has examined the structure and process of capital campaigns. Woronkowicz ( 2016 ) examines the effects of nonprofit facilities projects on financial vulnerability and finds that, for organizations that build new facilities, capital financing can potentially have adverse impacts on overall financial vulnerability, though it is unclear whether these effects are long term. To date, however, no study has examined the impact of large capital campaigns on the fundraising success of other nonprofit organizations, and studies of how (and whether) the fundraising activity of one nonprofit affects the success of another nonprofit in the same market (Lyons 2003 ;Omura and Forster 2014 ;Twu 2007 ) have produced mixed results.

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“…Non-profit and social economics entities have unique financing mechanisms which do not impact the relative amount of debt and equity in their capital structures (Trussel, 2012). Woronkowicz (2016) investigates nonprofit financial vulnerability metrics resulting from the effect of a capital facilities project. Woronkowicz (2016) uses data for a sample of non-profit entities and models the relationship between financial vulnerability indicators and facilities investments.…”

Section: Introductionmentioning

confidence: 99%

“…Woronkowicz (2016) investigates nonprofit financial vulnerability metrics resulting from the effect of a capital facilities project. Woronkowicz (2016) uses data for a sample of non-profit entities and models the relationship between financial vulnerability indicators and facilities investments. The findings of Marchioni and Magni (2018) and Woronkowicz (2016) are evidence of the fact that investments in facilities are associated with the costs of debt associated with facilities projects and influence non-profit finances.…”

Section: Introductionmentioning

confidence: 99%

Debt to Equity Levels in Polish Nonprofit Organisations

Michalski

Blendinger

Rózsa

et al. 2018

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The goal of the article is to find the answer whether it is possible to propose a model for fixing the best debt levels in the capital structure of non-profit organisations. Capital structure is an indicator that corroborates the level of financial risk. Non-profit organisations are an essential part of the general social policy. When considering the efficiency of non-profit entities from a donor perspective, it is important to take into account the way management uses the resources of a non-profit organisation as well as efficiency of that management activity. Non-profit organisation efficiency should be considered in the context of risk. One of the most important ways to increase probability to face financial distress is too high debt to equity relation. The paper illustrates the relationship between debt and equity in 1,560 Polish non-profit entities. The model which can fix optimal capital structure for a non-profit organisation in its current environment was delivered. The proposal of the paper includes a model which helps to find the optimal level of debt for non-profit organisation environmental conditions. The novelty of the model is based on the full costs of debt financing non-profit entities in the context of donor expectations, which in the Polish social and economic environment means that costs indirectly linked with the realisation of the main aim of the social entity cannot be higher than 10 % of the collected money sources. An additional point of our findings is that in comparison with the current state, Polish non-profit organisations need to improve their way of fixing capital structure.

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Is Bigger Really Better?

Cited by 6 publications

References 18 publications

Capital Structure of Nongovernmental Development Organizations

Capital Structure of Nongovernmental Development Organizations

The Effects of Capital Campaigns on Other Nonprofits’ Fundraising

Debt to Equity Levels in Polish Nonprofit Organisations

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