Choice of accounting method by not-for-profit institutions accounting for investments by colleges and universities

Chase, Bruce W.; Coffman, Edward N.

doi:10.1016/0165-4101(94)00360-2

Cited by 11 publications

(8 citation statements)

References 8 publications

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“…In a rising stock market, FMV will produce higher earnings and higher asset values, but a Peat (1985) study revealed that 78 percent of colleges and universities use the cost method. Looking at schools with endowments of greater than $1 million, Chase and Coffman (1994) observe that 36 out of 137 private institutions use FMV, while only three out of 33 public institutions do, which is consistent with publicly funded schools wanting to minimize reported earnings and wealth in order to avoid reductions in state funding. Private institutions with larger endowment holdings are more likely to choose the FMV method and to report higher mean investment returns.…”

Section: Political Cost Studiessupporting

confidence: 52%

“…Private institutions with larger endowment holdings are more likely to choose the FMV method and to report higher mean investment returns. Chase and Coffman (1994) speculate that the size of an institution's endowment may serve as a signal to potential donors that others have recognized the institution's value and that gifts will be managed competently. This can explain why institutions with larger endowment funds are more likely to use FMV.…”

Section: Political Cost Studiesmentioning

confidence: 99%

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Financial disclosure management in the nonprofit sector: A framework for past and future research

Hofmann

McSwain

2013

Journal of Accounting Literature

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This paper provides a review and synthesis of past research regarding financial disclosure management by nongovernmental nonprofit organizations and suggests directions for future study. The primary purpose of this review is to summarize the evidence on financial disclosure management to help regulators and other stakeholders understand why, how, and to what extent nonprofits engage in this behavior. The paper begins by defining disclosure management in nonprofit organizations and exploring the motivations for why it might occur. Next is a survey of the nongovernmental nonprofit financial reporting environment: objectives, common practices, and the informational needs of users of nonprofit financial reports. Research exploring the motives, methods, and consequences of disclosure management is summarized. The evidence suggests that nongovernmental nonprofit managers have a variety of incentives to manage reported numbers and that they do in fact alter spending decisions, choose accounting methods, and design cost allocations to achieve certain performance benchmarks. (M.A. Hofmann). 3 The papers included in this review cover a time period of about 25 years. However, due to the many changes in reporting standards and data availability in the recent past, the focus is primarily on the more recent studies as they are likely to be the most relevant going forward. 4 Political costs refer to the costs of additional regulation, including higher taxes, borne by large or high-profile firms (Watts and Zimmerman, 1986). Nonprofits are exempt from tax on their program-related activities but are taxed on business activities that are unrelated to their mission. Private non-operating foundations are also subject to taxes on undistributed income. Posnett and Sandler (1989) find that their sample of U.K. charities ''maximize the surplus available for expenditure on charitable output,'' which makes them service maximizers.

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Section: Political Cost Studiessupporting

confidence: 52%

Section: Political Cost Studiesmentioning

confidence: 99%

Financial disclosure management in the nonprofit sector: A framework for past and future research

Hofmann

McSwain

2013

Journal of Accounting Literature

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“…In addition, Tate (2007) Accounting choices might also matter in the relationships with principals such as subsidizing authorities and donors. 8 Reported wealth, for instance, can be assumed to influence the government' s and donors' willingness to provide subsidies and gifts (Chase and Coffman, 1994): higher levels of wealth are considered to be either a reason to reduce payments (making them a "political cost") or a signal of financial viability entailing more subsidies and gifts, which are then expected not to be wasted. Apparently the civil servants concerned and the public are assumed not to be able to assess the disclosed data correctly.…”

Section: Donors and Subsidizing Authorities As Organizational Principalsmentioning

confidence: 99%

“…In addition, managers might be concerned with their personal reputation (creating a gap between organizational and managerial goals and objectives), and thus select accounting methods that indicate maximal financial performance (return on endowments in this case). In a 1989 sample of 137 private colleges and universities in the United States, Chase and Coffman (1994) considered the choice between fair market value reporting of the endowments and reporting at cost. The results showed that institutions choosing the fair market value method were better endowed (supporting the financial viability reasoning) and realized higher returns on their endowments (not contradicting the reputation argument).…”

Section: Donors and Subsidizing Authorities As Organizational Principalsmentioning

confidence: 99%

“Corporate” governance in nonprofit organizations

Jegers

2009

Nonprofit Mgmnt & Ldrshp

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The economics-based theoretical and related empirical literature on the governance of nonprofit organizations is brought together and integrated in a way easily accessible for noneconomists. This literature is scattered in academic journals covering economics, health economics, management, and accounting, and in the more nonprofit-geared research publications. After defining corporate governance, I present in a nontechnical way the most appropriate economic framework for studying governance problems: the principal-agent theory. Most of the economic literature deals with the role and influence of the board and its relation to the organization' s management and performance. This is reflected in the article' s structure. The board' s functioning, composition, and committee structure are first discussed, followed by a review of the literature on incentive-based remuneration schemes, disclosure of financial information, and the use of debt to mitigate agency problems between the board and management. The literature dealing with donors and subsidizing authorities in governance relations is then presented. The article concludes with a number of practical implications of the scholarly obtained results to date, as well as some suggestions for further theoretical and empirical research.

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“…Early Western literature focused on the governance of non-profit organisations (e.g. Chase & Coffman, 1994;Christensen & Mohr, 2003;Christine et al, 2011;Harris & Neely, 2016). As the theory of organisational governance develops and matures and NPOs have exposed many issues in relation to accounting information disclosure, their accounting information quality is becoming one of the hot topics in the accounting academia.…”

Section: Literature Reviewmentioning

confidence: 99%

Socialized charitable foundations and accounting information quality

Liu

Sun

et al. 2019

China Journal of Accounting Studies

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Separating the functions of the government from those of charitable foundations is a common concern of regulators and scholars. Taking the foundations from 2006 to 2014 as a sample, we investigated the economic consequences of socialising charitable foundations from the perspective of accounting information quality. Empirical results show that the accounting information quality of socialised foundations is higher than that of non-socialised ones. It is still tenable after endogeneity is taken into account. The results of cross-sectional test indicate that the difference between the accounting information quality of socialised and non-socialised foundations becomes more significant when their regional institutional environment is relatively bad, when they are local foundations, when they raise funds publicly, and when they fail to engage top-100 accounting firms in audits. The conclusion provides empirical support for China to improve the information disclosure systems of charitable foundations and to promote their socialising transformation.

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Choice of accounting method by not-for-profit institutions accounting for investments by colleges and universities

Cited by 11 publications

References 8 publications

Financial disclosure management in the nonprofit sector: A framework for past and future research

Financial disclosure management in the nonprofit sector: A framework for past and future research

“Corporate” governance in nonprofit organizations

Socialized charitable foundations and accounting information quality

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