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Revenue Structure and Nonprofit Borrowing

Indiana University-Bloomington

Dwight V. Denison

University of Kentucky

J.S. Butler

University of Kentucky

The capital structure of nonprofit organizations plays a crucial role in their sustainability and development. This article explores the extent to which revenue diversification is incorporated into the leverage decision. In addition, this study investigates whether government grants have an impact on the long-term liabilities of nonprofit organizations. A model of nonprofit borrowing is proposed and examined with a national sample of arts, culture, and humanities nonprofit organizations. Model estimates show that nonprofit organizations with higher degree of revenue diversification are more likely to issue debt, but do not necessarily have higher debt ratios. Arts organizations with more government financial support are also more likely to issue debt and to have higher leverage ratios.

Key Words: revenue diversification • nonprofit capital structure • debt financing • government subsidy

This version was published on January 1, 2009

Public Finance Review, Vol. 37, No. 1, 47-67 (2009)
DOI: 10.1177/1091142108321239


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