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The Effects of Governance on the Financial Reporting Quality of Nonprofit Organizations
Michelle Higgins Yetman, University of California at Davis
Robert J. Yetman, University of California at Davis
ABSTRACT. Various stakeholders use nonprofit financial information for investing, contracting, and regulating decisions and these decisions can be affected by the quality of the underlying financial information. We find that oversight and monitoring provided by auditors and municipal bond lenders and associated intermediaries have consistently positive effects on nonprofit reporting quality. State level laws intended to provide oversight have less consistent effects. The findings suggest that attempts to enhance the monitoring and oversight of nonprofits can lead to higher quality financial reports, particularly if those efforts involve auditors or market participants such as lenders.
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