The Role of Related Party Fundraising on the Relation Between Reporting Quality and Donations

Abstract

Prior research shows that donors discount program ratios when a nonprofit organization reports zero fundraising expense. In this paper, we show that a plausible reason for organizations reporting zero fundraising expenses is that a related party conducts fundraising on the organization’s behalf. Consistent with this interpretation, we find that nonprofits reporting a related fundraising entity are more likely to report zero fundraising expenses. We also find that related party fundraising moderates the impact of reporting zero fundraising expenses on donors use of the program ratio in their donation decisions.