 Financing constraints in nonprofit organisations: A 'Tirolean' approachMarc Jegers Journal of Corporate Finance, 2011, vol. 17, issue 3, 640-648 Abstract: For the first time a stylised model, in the tradition of corporate finance models for profit organisations described by Tirole (2006), is developed in order to understand the existence of financial constraints in nonprofit organisations and their relationship with the presence of agency problems. Financial constraints can be expected to arise when there are no substantial opportunities to increase revenues from fundraising and when nonprofit managers might not be willing to exert high fundraising efforts. Furthermore, under these circumstances more agency problems lead to lower debt levels. In situations without expected financial constraints, more agency problems are shown to go together with higher debt levels. Extending watchdog agencies' assessment methods to include default payments can limit or even eliminate financial constraints. The model also allows to understand why larger and chain affiliated organisations should suffer less from financing constraints. The very scant empirical literature's findings on the matter are shown to be reconcilable with the model's predictions. Keywords: Nonprofit; organisations; Financial; constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:17:y:2011:i:3:p:640-648 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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