Identical ratios: a red flag of ratio management

Qianhua Ling () and Andrea Alston Roberts ()
Additional contact information
Qianhua Ling: Marquette University
Andrea Alston Roberts: McIntire School of Commerce, University of Virginia

Review of Accounting Studies, 2025, vol. 30, issue 1, No 4, 119-155

Abstract: Abstract This paper identifies a helpful red flag stakeholders can use to detect whether a nonprofit has managed its financial information. This red flag is reporting an identical program ratio—that is, the nonprofit organization reports the exact same ratio in multiple years—while reporting a large change in total spending. We find nonprofits are more likely to report identical program ratios when resource providers rely on ratios; pay is determined, at least in part, by performance; and the potential for regulatory interference is high. This paper also identifies the cost allocation techniques and the specific expenses nonprofits likely manage. We find most nonprofits alter the allocations of multiple expenses and find the specific expenses most likely manipulated are ones where managers have a high degree of discretion over how much to allocate to programs.

Keywords: Nonprofit; Reporting quality; Earnings management; Ratio management (search for similar items in EconPapers)
JEL-codes: L31 L38 M41 M48 (search for similar items in EconPapers)
Date: 2025
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11142-023-09814-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reaccs:v:30:y:2025:i:1:d:10.1007_s11142-023-09814-4

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-023-09814-4

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().