Earnings Management in Nonprofit Organizations: Does Governmental Financing Play a Role?

Sandra Verbruggen () and Johan Christiaens
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Sandra Verbruggen: Hogeschool-Universiteit Brussel (HUB), Belgium

No 2010/35, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management

Abstract: A vast amount of research has documented the existence of earnings management in for-profit settings. Nonprofit organizations are thought to pay less attention to the bottom line of the income statement. Earnings management research in nonprofit settings has therefore focused on the manipulation of expenses in order to improve efficiency ratios or taxable income, not reported earnings per se. Given a setting in which such ratios are not reported to the public, manipulation of the actual bottom line by nonprofit organizations is explored in light of the importance of governmental subsidies. The results suggest that nonprofit organizations drive their results towards the breakeven point and that manipulation seems to be intensified by increased governmental funding.

Pages: 42 page
Date: 2010-11
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Working Paper: Earnings Management in Nonprofit Organizations: Does Governmental Financing Play a Role? (2010)
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