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

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

No KERP 2006/14, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: We provide a new rationale for commercial activities by non-profit organizations (NPOs) 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 NPOs operating in the state of New York.

Keywords: Insurance; investment; non-profit organisations. (search for similar items in EconPapers)
JEL-codes: C21 L21 L31 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-07
New Economics Papers: this item is included in nep-ias
Note: Bennett and Iossa acknowledge gratefully financial support from the ESRC under grant R/000/22/3811.
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Related works:
Working Paper: Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms (2003)
Working Paper: Commercial Activity as Insurance: the Investment Behavior of Non-profit Firms (2003)
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