Organizational Form and Accounting Choice: Are Nonprofit or For-Profit Managers More Aggressive?

Abstract

Although recent academic studies on nonprofits have documented aggressive accounting behavior, these studies have primarily examined the sector in isolation and have not reached definitive conclusions regarding the relative aggressiveness of the nonprofit and for-profit sectors. Using actuarial assumptions for defined benefit (DB) pension plans as a proxy for discretionary accounting choices, we examine whether nonprofit managers respond through their actuarial choices to incentives to manage DB pension assumptions, and whether differences exist in the aggressiveness of these assumptions for nonprofits and for-profits. We find evidence consistent with nonprofits managing pension assumptions when incentives and less monitoring exist. Comparing our nonprofits to a sample of for-profits, we find evidence consistent with nonprofits utilizing more aggressive pension assumptions and making stronger responses to incentives to manage these assumptions. Our findings are consistent with the premise that nonprofits are more aggressive than for-profits when using actuarial estimates that deflate pension obligations and inflate performance.

Earnings Management by Non‐profit Organisations: Evidence from UK Charities

“…This finding clarifies the mixed findings from prior studies with regard to the relationship between leverage and earnings management (Verbruggen and Christiaens ; Jegers ), and partly supports the US‐based finding by Vermeer et al. () that managers of NPOs with higher leverage appear to manage income upwards.…”

“…Recently, Vermeer et al. () found that US non‐profits with high financial leverage appear to manage actuarial assumptions in order to reduce reported liabilities and expenses. Yet, results from recent studies have not been consistent and/or significant in order to be able draw conclusions about a leverage effect (Verbruggen and Christiaens ; Jegers ).…”

“…Admittedly, a limited number of empirical studies find evidence of earnings management (also financial disclosure management and/or accounting manipulation) in non-profit settings (Leone and Van Horn 2005;Jones and Roberts 2006;Ballantine et al 2007;Verbruggen and Christiaens 2012;Jegers 2013;Boterenbrood 2014;Vermeer et al 2014). In the case of the UK, a research gap exists because there has been no comprehensive study of earnings management in UK charities, 1 and the closest relevant study (Ballantine et al 2007) focuses only on quasi-public bodies (English NHS Trusts).…”

Managers’ Compensation in a Mixed Ownership Industry: Evidence from Nursing Homes

“…There is evidence that for-profit hospitals report some financial data more aggressively than non-profit hospitals (33), and the same may be true for this sample of nursing homes.…”

Research in auditing: main themes

“…Finally, the last theme is socio-economic data of the company, which presents papers assessing the economic and social aspects of the companies, whether public, private, or nonpro t. For example, its size, family companies, company age, operational complexity, pay higher wages, location, insolvency, company value, and classi cation aspects as public, private, and nonpro t (Carson & Fargher, 2007;Choi, Kim, Qiu, & Zang, 2012;Clatworthy & Peel, 2013;Humphrey & Miller, 2012;Vermeer, Edmonds, & Asthana, 2014). A new theme not previously identi ed, showing its signi cance in the eld (19.5%).…”