Relevance of corporate governance practices in charitable organisations

Abstract

Purpose -The purpose of this paper is to examine whether the registered charities in New Zealand have adopted the principle-based corporate governance practices similar to those adopted by the publicly-listed companies and the effect corporate governance practices have on their financial performance measured by technical efficiency, allocative efficiency and quick ratio. The paper addresses four important questions: how registered charities in New Zealand are managed and controlled; whether the funds donated to registered charities are utilised effectively; the nature of the corporate governance practiced by registered charities in New Zealand; and the nature of compliance to the Charities Act 2005. Design/methodology/approach -Panel data for the registered charities over the period 2008-2010 are analysed using ordinary least squares (OLS) regression and Tobit model regression. Technical efficiency, allocative efficiency and quick ratio are used as the dependent variables. Findings -The findings indicate that there is no reporting requirement for the registered charities under the Charities Act 2005 to report detailed information regarding the board make-up, board committees, board meetings, etc. and therefore, registered charities have not reported such information. The results show also that board gender diversity is an important corporate governance mechanism to mitigate agency problem in charitable organisations in New Zealand. However, large board size and large donors have potential to increase agency costs in charitable organisations in New Zealand. Research limitations/implications -Caution should be exercised when interpreting and generalising the paper's results, as this study is a case study of registered charities in New Zealand and data comprised only large charities that have revenue over NZ$20 m. It should also be noted that there was a small sample size, which may have had a bearing on the results. Practical implications -This study offers insights for policy makers and practitioners interested in adopting similar corporate governance practices within their country. Social implications -Within New Zealand, issues relating to management and control of charitable organisations are better understood and as a consequence, development of sector-wise standards could be initiated. Originality/value -This research is novel as it investigates the nature of corporate governance practices relating to the registered charities in New Zealand. The availability of data provided by Charities Commission made this research possible.

Financial Management Effectiveness and Board Gender Diversity in Member-Governed, Community Financial Institutions

“…Higher levels of women on boards are typical in NPs. Reddy et al (2013) found a positive association between the %WOB and financial efficiency and liquidity in charities in New Zealand and Hartarska and Nadolnyak (2012) reported a non-linear association between financial efficiency and gender diversity in Community Development Loan Funds in the US. 3 Other studies of board gender diversity consider a range of different factors.…”

“…It is assumed that the external environment affects 2 Some empirical studies report a positive association between gender diversity and financial performance (Luckerath-Rovers 2013; Andrés-Alonso et al 2009;Adams and Ferreira 2009;Carter et al 2003), others a negative (Shrader et al 1997) or no relation (Ali et al 2014;Carter et al 2010;Rose 2007;Farrell and Hersch 2005). 3 Reddy et al (2013) do not disclose information on the %WOB, opting to report absolute numbers. The mean number of women on the board is 2.4 (mean board size is 7).…”

Corporate Governance and Capital Structure: Moderating Effect of Gender Diversity

“…Moving ahead, the empirical literature argues that the larger board may result in increased monitoring cost in listed firms (Raheja, 2005) and may outweigh the benefits of stringent monitoring (Reddy et al, 2013). In a charitable organization, the directors are rarely paid and their voluntary participation on the board mitigates this problem (Fontes-Filho & Bronstein, 2016).…”

Theoretical considerations on corporate governance in the third sector in the agency theory perspective

“…Although the governance topic has been extensively explored in NGOs studies (GAZLEY and NICHOLSON-CROTTY, 2018), especially regarding the dimensions 'Board of Directors' (REDDY, LOCKE and FAUZI, 2013) and 'transparency' (HASKI-LEVENTHAL and FOOT, 2016), there are still unexplored connections. These are the role of the project tied to the donation as an antecedent, moderator, or mediator of the influence of governance on donations' receipt, and the potential moderating role of NGO's qualification (as OSCIP), in the relationship between governance and donations' receipt in a low regulation environment such as Brazil.…”