Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms

John Bennett (), Elisabetta Iossa and Gabriella Legrenzi ()

Economics and Finance Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: We provide a new rationale for commercial activities by non-profit organizations whose primary concern is to supply mission output. We show that investment in commercial activity may be used to insure mission output against the uncertainty of donations, though possibly at the cost of lower expected mission output. In this case, the amount of commercial investment is positively related to the variance of donations and to the degree of risk aversion. These predictions are corroborated by empirical tests on data from non-profit operating in the state of New York.

Pages: 34 pages
Date: 2003-11
New Economics Papers: this item is included in nep-ias
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Related works:
Working Paper: Commercial Activity as Insurance: the Investment Behavior of Non-Profit Firms (2006)
Working Paper: Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bru:bruedp:03-26

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