Article ID Journal Published Year Pages File Type
5057622 Economics Letters 2017 5 Pages PDF
Abstract

•We find a discontinuity around zero in the distribution of the rates of return on investments for tax-exempt organizations.•Rates of return are significantly more likely to be slightly positive than slightly negative.•This pattern is found for a wide range of nonprofit missions.•This suggests that some tax-exempt organizations manipulate investment returns to avoid reporting negative returns.

We provide evidence that nonprofit organizations manipulate reported investment returns to avoid investment losses. We find a sharp discontinuity around zero in cross-sectional distribution of the rates of return on investments for tax-exempt organizations: rates of return are significantly more likely to be slightly positive than slightly negative. This pattern is found for a wide range of nonprofit missions, including religious related charities and community improvement organizations.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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