Charity Ratings

Abstract

How do charitable donors respond to the third‐party ratings that signal the quality of charities? I investigate this question using a novel data set from Charity Navigator, which provides quality ratings for 5,400 charities. Because Charity Navigator prominently displays a charity's star rating which is assigned based on its overall rating, one can identify the causal impact of a one star increase in ratings on charitable contributions with a regression discontinuity framework that exploits the threshold values of the overall ratings. I find that in general, the third‐party ratings have a minor and often insignificant impact on charitable contributions received by charities. However, for relatively small charities, a higher rating leads to an increase in charitable contributions received. In particular, for these charities, I find that a one star increase in ratings is associated with a 19.5% increase in the amount of charitable contributions received. This result is robust under alternative model specifications and highlights the role of the third‐party ratings in not‐for‐profit markets.

Examining the Mediating Influence of Interlocking Board Networks on Grant Making in Public Foundations

“…Evidence suggests that even when individual donors have access to performance rating systems, such ratings do not play a significant role in donation decisions. Instead, individual donors may prefer to rely on status signals—familiarity, word of mouth, and visibility in the community (Yörük, 2016). While such familiarity may come through personal involvement with the organizations, for busy donors, knowing someone who sits on a board of an organization or recognizing the elite status of a particular board may signal that such an organization is a “safe bet” for a grant.…”

Empathic and Numerate Giving: The Joint Effects of Victim Images and Charity Evaluations

“…Big charities often have smaller overhead costs (e.g., Bowman, 2006) and there are many reasons why they generate more donations. Some work further suggests that changes in charity ratings lead to changes in charity revenues (e.g., Gordon, Knock, & Neely, 2009;Yörük, 2016), but it is unclear if this is driven by efficiency evaluations per se. For instance, people might respond to the number of stars given to a charity without deeply considering what these stars represent.…”

Excusing Selfishness in Charitable Giving: The Role of Risk

“…2 For an overview of these reasons as well as others, see surveys in Vesterlund (2006) and Andreoni (2006). 3 While Brock et al (2013) and Krawczyk and Lec (2010) involve objective risk in a dictator game, other studies document reduced giving in response to other types of risk or uncertainty, involving performance metrics (Yörük, 2013;Meer, 2014;Brown et al, 2014;Karlan and Wood, 2014), the use of donations (Batista et al, 2013;Gneezy et al, 2014), and the recipient of donations (Small and Loewenstein, 2003;Fong and Oberholzer-Gee, 2011;Li et al, 2013). 4 Results are from a Google Consumer Survey I ran in Sept. -Nov. 2014.…”