Does it pay to pray? Religious nonprofits and funding

This study examines whether religious identity has an impact on two types of funding, donations and government grants, received by nonprofit organizations. We argue that religious nonprofits attract more donations because (1) donors feel an affinity or special tie to religious organizations and/or (2) donors regard religious organization as having good stewardship. Using 54,917 organization-year observations we find that 18% of the largest U.S. nonprofit organizations have some religious identity and that these organizations receive more donations than their non-religious counterparts. We further find that the association is more pronounced for nonprofits in more religious geographic areas, those with unrestricted donations, and organizations with better stewardship. Conversely, we find that government grants are negatively associated with religious identity, a result consistent with the separation between church and state established under U.S. law and tradition. This negative relationship, however, is mitigated for nonprofits with better stewardship. Our results should be of interest to donors and policymakers who seek to understand the impact of religion on nonprofit funding as well as the role of donor affiliation and stewardship in the fundraising process.     

慈善组织财务信息披露质量的影响因素与后果研究

本文调查并实证检验了慈善组织财务信息披露质量的影响因素及后果。基金会财务信息披露质量受组织复杂性和管理效率的影响,但影响公募和非公募基金会财务信息披露质量的因素存在差异。成立年限长、管理效率高、非教育助学类的公募基金会财务信息披露质量更高,收入来源分散和管理效率较高的非公募基金会财务信息披露质量更高。而且,基金会财务信息披露质量与后期捐赠收入显著正相关。本文研究证明了财务信息披露质量的确能影响捐赠者的捐赠决策,加强慈善组织财务信息披露监管显得非常必要。     

Web disclosure and the market for charitable contributions

Nonprofit organizations face intense competition in the market for charitable contributions. Increasingly, donation decisions are made online, and organizations have responded by implementing substantive Internet disclosure and reporting regimes. We posit here that the voluntary disclosure of financial and performance information inherent in these regimes provides additional relevant information to a broad array of market participants, and thus has a positive impact on the receipt of charitable contributions. We test our hypotheses on a random sample of 400 US nonprofit organizations by building on the well established economic model of giving (Weisbrod and Dominguez, 1986), in which donations serve as the proxy for demand. Our central research question is thus: Are donors willing to “pay” for Web disclosure? Results indicate a positive relationship between the level of charitable contributions and the amount of disclosure provided by an organization on its website; however, performance and annual report disclosure are more important than financial disclosure, and performance disclosure has the biggest impact in organizations that are less reliant on donations.     

Behavioral dynamics of tax compliance when taxpayer assistance services are available

This research utilizes a laboratory experiment involving a large and diverse set of participants to investigate the behavioral dynamics of tax reporting in a setting where tax liability is uncertain and the tax agency makes a service available to help resolve the uncertainty. Our design varies the level of liability uncertainty, as well as the cost and quality of the information service. We find that, in the absence of an information service regime, the behavioral response to past audits, whether penalizing or not, is to report a lower tax liability. However, with an information service present (regardless of whether it is accessed), behavioral responses to past audits are no longer found. Interestingly, information service acquisition decreases modestly in response to a penalizing audit, although as the experiment progressed a larger proportion of participants were compliant, offsetting this effect. Mirroring the few experimental studies that have investigated tax liability information services, we find that providing these services has a strong and positive effect on tax compliance.     

How Firms Make Capital Expenditure Decisions: Financial Signals, Internal Cash Flows, Income Taxes and the Tax Reform Act of 1986

This paper empirically assesses the determinants of future net capital expenditures for a broad cross-section of COMPUSTAT firms from 1973 to 1989. We explore three general categories of factors expected to affect investment: (1) external equity financing, (2) internally generated accounting information, and (3) tax incentives. We find that external financing and information plays a role in that both positive stock returns and equity issuances indicate future increases in investment. The results suggest that high stock prices not only lower the cost of capital, but also signal good investment opportunities. Accounting information about internal sources and uses of funds are also important in the investment decision. In particular, net income and depreciation are positive indicators of future investment while there is a tradeoff between the payment of dividends and investment. Further, positive changes in available cash liquidity also motivate future investment. While taxes are not important in the investment decision on average, we find that firms with previously higher income taxes invested substantially more in 1985 and 1986. This coincides with the repeal of the investment tax credit and the accelerated depreciation schedules in the Tax Reform Act of 1986. We view this as evidence that federal tax policy in the 1980's induced firms with high income tax obligations to accelerate capital expenditures just before the favorable tax treatment of capital expenditures was eliminated.     

非公有制企业党组织与企业捐赠

与公有制企业党组织受到较多关注不同,非公有制企业党组织是否真正发挥影响力是同样重要但却被学术界忽略的待研究问题。本文基于手工收集的民营上市公司党组织的相关数据,从社会捐赠这一视角研究党组织影响力对其履行社会责任的影响。结果发现:民营上市公司党组织的影响力越大,企业的社会捐赠力度越大,且显著高于同行业和同地区的平均捐赠水平;这种影响力的促进作用在民营上市公司党组织基础更加稳固的企业、管理层对党组织重视程度更高的企业和党代会时期更加明显。上述结果在控制了可能的内生性问题后依然稳健。本文的发现意味着非公有制企业党组织有助于促进其履行社会责任,这有助于评估和促进非公有制企业党组织的建设及其作用的发挥。     

中国激励企业慈善捐助的税收优惠制度分析

企业慈善捐赠能促进社会财富的第三次分配,弥补政府职能的缺位,是企业承担社会责任的主要形式。慈善事业的蓬勃发展,需要完善的捐赠税收优惠制度予以支持和引导。《中共中央关于全面深化改革若干重大问题的决定》提出“完善慈善捐助减免税制度”,应当从捐赠税收优惠制度的形式优化,实行据实扣除和限额扣除相搭配的税前扣除方式,构建非货币性财产捐赠评估规则,扩大捐赠税前扣除资格保有组织数量等方面完善激励性制度安排,同时从企业捐赠税收优惠监督机制的重构方面完善约束性制度安排。     

An Experimental Examination of US Individual Donors’ Information Needs and Use

This paper adopts an internet‐based experiment to investigate whether and how individual donors use nonprofit organizations’ financial and nonfinancial information when making their donation decisions. Using undergraduate students in the United States (US) to proxy for individual donors, our results indicate that individual donors are more likely to acquire nonfinancial information, such as nonprofit organizations’ goals, outcomes, programs and missions, than financial information. Donors integrate nonfinancial information into their decisions as their actual donations are significantly correlated with such information. Our results also indicate that while individual donors acquire financial efficiency measures, including the program expense ratio and fundraising expense ratio, they do not seem to integrate such information into their decisions as their actual donations are not significantly correlated with the efficiency information. This study contributes to the nonprofit literature and research domain focusing on charitable giving and donor preferences.     

The interaction between corporate tax structure and disclosure policy

When socially desirable behaviors are deemed difficult to legislate, tax code is often called upon to indirectly achieve the desired ends. Adjustments to tax policy have been employed to spark investment, encourage charitable donations, and discourage tobacco consumption, to name a few examples. This paper demonstrates that tax policy may also be an effective means of encouraging welfare enhancing disclosures by firms. Further, by inducing disclosures of the right types of information while discouraging revelation of other types, tax policy proves to be a more versatile instrument than direct regulatory attempts which can mandate (but not prohibit) disclosures. The intuition behind our results is that when firms make decisions to disclose (or withhold) pieces of private information, such a decision is often made with an eye on the potential for a large payoff. In such cases, progressive taxes can dampen the appeal of big payoffs and better align the incentives of firms with those of consumers. In short, while progressive taxes may be criticized for curbing aggressiveness, it is precisely such a decrease in aggressiveness that can prompt efficient sharing of information.     

Inconsistent Signals,Earnings Announcements,and Market Uncertainty

We test the proposition in Johnstone (2016) that new information may lead to higher, rather than lower, uncertainty about firms’ future payoffs. Based on the Bayesian rule, we hypothesize earnings news that is inconsistent with investors’ prior belief will lead to higher market uncertainty. Using earnings signals in the past few quarters to proxy for investors’ prior belief, we find supporting evidence that, relative to consistent earnings news, inconsistent news results in an increase in market uncertainty measured by implied volatility. Inconsistent earnings news has a larger effect on market uncertainty when prior beliefs are stronger and when the news is negative. Overall, our evidence highlights the importance of prior belief and inconsistent signals in understanding the effect of earnings news on market uncertainty.     

Increasing Charitable Giving: What Can We Learn from Economics?*

There is growing policy interest in charitable giving in the UK. As part of its Big Society agenda, the current government is keen to encourage a higher level of donations, highlighting new technologies, new social norms and tax incentives as potential mechanisms for raising giving. In the 2012 Budget, however, the Chancellor also proposed limiting tax relief on donations to £50,000, sparking an intense discussion about the effectiveness and desirability of tax incentives for major donors. This paper brings together recent evidence relevant to the ongoing policy debates.     

Analyst coverage and corporate tax aggressiveness

We examine the impact of analyst coverage on corporate tax aggressiveness. To address endogeneity concerns, we perform a difference-in-differences analysis using a setting which causes exogenous decreases in analyst coverage. Our tests identify a negative causal effect of analyst coverage on tax aggressiveness, suggesting that higher analyst coverage constrains corporate tax aggressiveness. Further cross-sectional variation tests find that this constraining effect on tax aggressiveness is more pronounced in firms with lower investor recognition and firms with more opaque information environments. Our results are consistent with the notion that higher analyst coverage increases the visibility of aggressive tax planning behavior as well as heightens analysts’ demand for more transparent information, which in turn reduces tax aggressiveness.     

Nonprofit executive incentive pay

We utilize information only recently disclosed on Form 990 to examine the use, and consequences of, incentive pay at nonprofit organizations. Bonuses are common in nonprofits, as we observe that approximately 45% of the 44,000 organization-year observations in our sample reported paying CEO bonuses. We find that the bonuses are positively associated with profitability, competition from other nonprofits, firm size, available cash, and use of compensation consultants and committees, while negatively related to board oversight, donations, and grants. Our results also suggest that donors look unfavorably at the payment of bonuses; that is, bonuses are associated with lower future donations. Nonetheless, we find evidence consistent with the payment of bonuses incentivizing nonprofit executives, as despite reduced fundraising, future profitability and program services are positively associated with current bonus compensation.     

The use and consequences of perquisite types in nonprofit organizations

We document perquisite use in the nonprofit sector, the determinants of that use, and the ensuing consequences. Relative to the for-profit sector, the nonprofit sector is characterized by a lack of residual ownership rights and less detailed disclosure requirements, factors that have the potential to influence this piece of the compensation package. Using a sample of over 126,000 organization-year observations from 2008 to 2018, we document that approximately 24% of organizations report providing one or more of their executives with perquisites. We find that perks are more likely in larger nonprofits with excess endowments and fewer governance policies, and less likely at organizations with more outside monitors. We also find that perk disclosure has a negative impact on future donations. However, when we decompose our analysis by type of perk, we find evidence that some perks have a positive effect on future donations. Our results are robust to a variety of alternative formulations and provide useful insights for nonprofit regulators, boards, and donors.     

FRACAS: A Computerized Aid for Reasoning in Tax

Problem solving in the tax domain requires two kinds of knowledge: of the law itself and of how the law has been applied in the past. The need for the second factor arises as a result of the ambiguity of natural language. The problem solver requires information on how the courts have adjudicated specific cases in the past. This information would then provide the basis for reasoning about the current case. In this paper we address the issue of developing a system which will retrieve relevant historical cases. The cases are stored using a frame representation scheme and the users can retrieve cases by specifying either attributes alone or attributes and values associated with them. Currently the system has been implemented in Pascal on a Cray. The case base contains 250 cases relating to Section 183 of the tax code.     

Measuring the Effect of Federal Research Funding on Private Donations at Research Universities: Is Federal Research Funding More than a Substitute for Private Donations?

The nature of federal research funding has changed in the United States over the last 30 years. In part, federal research funding has changed in the distribution of funding across disciplines and across universities. Federal funding to universities with historically low levels of funding has also experienced greater growth than those universities with historically high levels of funding. In addition, universities have become more involved in the political process with respect to the allocation of funding for higher education. As the nature of government funding changes, this paper questions its effect on private donations to research and non-research universities. The general presumption of much of the existing theoretical work is that government and private funding for charitable goods are substitutes. Limited evidence exists to suggest, in some circumstances, there may be a positive correlation between these two sources of funding. Potentially, because the government undertakes the expense to gather information about the research universities, and engages in such activities as peer-review of research proposals, the government through its grant awards may provide a signal of quality of research or other information to donors that is less noisy than that available to private donors. Similarly, there may be other types of spillover effects from research funding to private donations. In this case, a change in government grants has both a positive and negative effect on private donations, suggesting a positive correlation between private and public donations if the effect from the dissemination of information is greater than the substitution effect of government grants. I examine data for private and public universities in the United States to measure the relationship between private and public donations under a fixed-effects OLS regression. I explore issues of bias from endogeneity or omitted variables and report the results from a two stage least squares regression in which I use a set of measures that affect federal research funding but not private donations. Regardless of the specification, the results suggest private and public donations are positively correlated for research universities and negatively correlated for non-research institutions. On average, increasing federal research funding by one dollar increases private donations by 65 cents at research universities, decreases private donations by 9 cents at universities whose highest degree granted is a masters, and decreases private donations by 45 cents at liberal arts colleges.     

Restrictions on managerial outside job opportunities and corporate tax policy: Evidence from a natural experiment

We examine the effect of restricting executives’ outside job opportunities on corporate tax avoidance and tax risk, using a natural experiment of the staggered adoption and rejection of the inevitable disclosure doctrine (IDD). Based on a difference-in-differences analysis, we find strong evidence that the IDD decreases effective tax rates. We also find that the IDD reduces tax risk though the evidence is weaker. The effect is generally more pronounced when the risk of dismissal due to poor performance is higher. Additional analyses show that the IDD increases the use of tax haven operations. Finally, a path analysis shows that the increase in tax avoidance contributes about 6% to 7% of the total effect of the IDD on firm value. Overall, the results suggest that career concerns motivate executives to reduce their firms’ tax burden using low risk strategies.     

Bulldog printing: cost estimation and information elicitation mini-case and teaching notes

This case describes a printing company that is concerned about predicting paper waste on their web offset presses as a component of both job estimating (pricing) and overall control standards in order to respond to competitive pressures. We use this case in the undergraduate cost/managerial course. Students first seek information from the instructor (representing company management). Then, using regression and correlation analysis, students identify the activities that best predict waste. Given the information about press speeds and paper waste generated, an obvious conclusion is that speed is the independent variable and waste the dependent. However, students find that there is a real question about which is x and which y. In fact, neither variable is the independent variable; both are dependent on other factors. In their first regression and correlation analysis using just speed and waste, they find that waste and speed are inversely related. They must then move on to isolate the intervening activities that can explain what is happening. Students should first determine that waste differs for the two paper types: newsprint and machine-coated. They then should determine that it is the level of complexity of the job that increases waste and decreases processing speed. These measures of complexity can then be used for pricing and control. While the case lends itself to many formats, it has been used as an information elicitation case using e-mail. Information elicitation (or incident process) cases help develop critical thinking as students identify key issues and ask questions to determine the best solutions.^fn1 They are enjoyable for both the students and the professors, and place students in a more real-world situation where all the necessary information is seldom readily available. The use of e-mail correspondence is also more reflective of a real-world situation and has the advantage of providing the instructor with a record of the interactions. In this elicitation case, students are given limited information about paper waste at Bulldog. The instructor role-plays the controller of the company, Chris Walters, and students ask Walters appropriate questions to determine activities that relate to paper waste. The following presents the information provided to students. The Teaching Note explains the process and provides the controllers information.     

Corporate tax avoidance: is tax transparency the solution?

Corporate tax avoidance has been a matter of considerable public attention, particularly since the 2008 global financial crisis. The nature of calls for tax reform and increased regulation, advocated most prominently by tax activists and NGOs, has revolved around transparency as a possible corrective to unacceptable tax avoidance, although there is no consensus as to what the term tax avoidance encompasses and when it becomes unacceptable. We examine two responses to calls for increased transparency about the tax affairs of multinational entities: firstly, country by country reporting that provides information to tax authorities, and secondly the UK requirement for publication of tax strategies, whereby large companies put information into the public domain. We find considerable misunderstanding about the benefits of transparency in this setting. By failing to consider the limits of transparency initiatives there is a risk of dysfunctional consequences, for example additional costs in providing and processing additional information, the prospect of increased disputes as new information generates new misinterpretations and uncertainty in determining the final tax position. There is a risk that greater disclosure will not effectively address concerns about unacceptable corporate tax avoidance.     

Capital structure choice and company taxation: A meta-study

This paper provides a quantitative review of the empirical literature on the tax impact on corporate debt financing. Synthesizing the evidence from 48 previous studies, we find that this impact is substantial. In particular, the tax rate proxy determines the outcome of primary analyses. Measures like the simulated marginal tax rate (Graham, 1996) avoid a downward bias in estimates for the debt response to tax. Moreover, econometric specifications and the set of control-variables affect tax effects. Accounting for misspecification biases by means of meta-regressions, we predict a marginal tax effect on the debt ratio of about 0.27.