The role of rating agencies in the market for charitable contributions: An empirical test

Teresa P. Gordon, Cathryn L. Knock and Daniel G. Neely

Journal of Accounting and Public Policy, 2009, vol. 28, issue 6, 469-484

Abstract: Rating agencies play the role of information intermediaries in the market for donations. These watchdog organizations obtain and interpret accounting data and other information about charitable organizations and report ratings to help donors select among the many organizations soliciting contributions. In the age of the internet, information from Internal Revenue Service Form 990 returns prepared by tax-exempt organizations is more readily accessible than ever before. This study examines whether the zero- to four-star ratings provided by Charity Navigator have additional information content for donors. Charity Navigator was selected because its rating system relies almost exclusively on the 990 returns and presumably adds value by incorporating peer-group expectations for various ratios and by presenting straightforward and concise data. Using a random sample of 405 charities rated by Charity Navigator, our results suggest that rating changes do impact contributions. Positive rating changes were associated with an increase in contributions and organizations with a decline in rating were associated with decreased contributions. These effects were in addition to what would be predicted using an efficiency ratio commonly computed from Form 990 accounting data and other control variables.

Keywords: Ratings; Information; intermediary; Charitable; donations; Not-for-profit; organizations; Tax-exempt; organizations (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0278-4254(09)00068-4
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jappol:v:28:y::i:6:p:469-484

Access Statistics for this article

Journal of Accounting and Public Policy is currently edited by L. A. Gordon

More articles in Journal of Accounting and Public Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().