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The Effects of Nonprofit Accountability Ratings on Donor Behavior

University of Kentucky

^* To whom correspondence should be addressed. E-mail: margaret.sloan{at}uky.edu.

	Abstract

Although accountability systems are established to ensure organizational adherence to financial and ethical standards for nonprofit organizations, the reality of whether such standards make a difference to donors has not been measured. This article discusses the current landscape of accountability systems and accountability ratings and describes a model for estimating the effect of ratings systems on donor behavior within the theoretical context of information asymmetry. Hypotheses are tested with nonprofit ratings for New York charities from the Better Business Bureau’s Wise Giving Alliance to estimate the effect of accountability ratings on the amount of contributions an organization receives. Results indicate that the Wise Giving Alliance "pass" ratings have a statistically significant effect on the contributions received; however, "did not pass" ratings are nonsignificant. The study is important for academics as well as practitioners who are monitoring time and money spent on accountability issues.

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