Stakeholder Orientation and Capital Structure: Social Enterprises Versus For-profit Firms in the Italian Social Residential Service Sector

Alessandro Fedele and Raffaele Miniaci

No 1233, Euricse Working Papers from Euricse (European Research Institute on Cooperative and Social Enterprises)

Abstract: In this paper, we investigate whether capital structure differs between for-profit and nonprofit sectors by focusing on two key aspects of the latter: the non-distribution constraint and the stakeholder oriented governance system. We develop a theoretical model and show that the former negatively affects leverage, defined as the amount borrowed over the total investment, whilst the latter has a positive effect. We then analyze a longitudinal data set of balance sheets of 800 firms operating in the social residential sector in Italy and show that, once controlled for observable characteristics, for-profit companies have a leverage 18% higher than nonprofit enterprises, even if the latter face lower credit costs. We explain this finding by arguing that the effect of the non-distribution constraint prevails over the effect of stakeholder orientation.

Keywords: for-profit and nonprofit enterprises; capital structure; non-distribution constraint; stakeholder orientation (search for similar items in EconPapers)
JEL-codes: A13 C1 D11 D21 G32 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:trn:utwpeu:1233

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