Nonprofit Equity

A Behavioral Model and Its Policy Implications

Bibliographic Data

ID11680609
AuthorsHoward P Tuckman (University of Memphis, corresponding author), Cyril F Chang (0009-0003-1395-9915)
Year1992
Volume11
Issue1
Pages76-76
Publication date1992-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Policy Analysis and Management (JOURNAL)
Journal identifiersISSN: 0276-8739 • E-ISSN: 1520-6688
PublisherWiley (PUBLISHER • GB)
DOI10.2307/3325133
PMID10116416
OpenAlexW1981213293
LanguageEN
Citations received13

This article assumes that nonprofit decisionmakers have an incentive to earn and accumulate surpluses, and it suggests six reasons for this being the case. Based on the assumption that both the program outputs and the equity of a nonprofit yield satisfaction to its decisionmakers, a behavioral model is developed. This is used to derive a demand function for equity, which is then applied to a national sample of 6168 charitable nonprofits drawn by the Internal Revenue Service for the 1985 taxable year. The results substantiate the hypothesis that nonprofit decisionmakers consciously plan to increase their organization's equity. Currently, evidence of continued equity buildup is not sufficient to call into question a nonprofit's exempt status, because federal tax laws assume that surplus accumulations will ultimately be used in support of program mission. However, equity accumulation can become excessive. We present several criteria to define excessive equity accumulation and discuss why large equity accumulations may not be in the best interest of society

Actuarial science · Business · Club deal · Economic Justice · Economics · Equity (law · Equity capital markets · Equity risk · Equity theory · Incentive · Microeconomics · Political science · Private equity · Private equity fund · Public economics · Revenue · Revenue sharing · Taxable income · Gender, Labor, and Family Dynamics · Law · Nonprofit Sector and Volunteering · Taxation and Compliance Studies · Accounting · Finance