The Effects of Governance on the Accuracy of Charitable Expenses Reported by Nonprofit Organizations

• 成果类型: Article
• 署名作者: Yetman, Michelle H.; Yetman, Robert J.
• 署名单位: University of California System; University of California Davis
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2011.01121.x
• 发表日期: 2012
• 页码: 738-+
• 关键词: Sarbanes-Oxley; corporate governance; earnings management; Donations; BOARD; determinants; INFORMATION; Auditors; MARKETS; demand

摘要

A significant body of research has examined the effects of governance on reporting quality in the for-profit setting, yet we know little of the relationship in the nonprofit setting. Our paper examines the extent to which various governance mechanisms improve nonprofit reporting quality across a broad sample of nonprofit organizations. The financial disclosure we examine is the ratio of charitable expenses to total expenses, which is one of the most widely used financial metrics to measure nonprofit performance. Prior research shows that this ratio is manipulated upwards by overstated amounts of charitable expenses. Our comprehensive set of governance metrics includes various forms of internal and external oversight and monitoring, some of which have just become publicly available as a result of the recently enhanced nonprofit disclosure environment on governance policies. Our central research hypothesis is that stronger governance will result in more accurately reported charitable ratios. Our results show that the accuracy of reported charitable expenses is increasing in our proxies for the distance separating collective ownership and control, board of director monitoring, audit quality, capital provider monitoring, and regulatory oversight. These findings, many of which are the first of their kind in the nonprofit setting, are important for several reasons. First, they confirm that existing governance mechanisms improve nonprofit reporting quality. Second, users can have more confidence in the financial reports of more highly governed organizations. Finally, the results provide information to policy makers or boards of directors seeking to enhance overall nonprofit financial reporting quality.