Testing Competing Capital Structure Theories of Nonprofit Organizations

Testing Competing Capital Structure Theories of Nonprofit Organizations
Public Budgeting and Finance 31(3): 119-143

Calabrese, Thad,

The static trade-off and pecking order capital structure theories are analyzed and applied to nonprofit organizations. In addition, this paper also considers how nonprofits adjust their leverage over time. The analyses consider the unique role of donor-restricted endowments in the decision to borrow, as well as different types of borrowing by nonprofits. The results indicate that nonprofit capital structure choices are best explained using the pecking order theory, in which internal funds are preferred over external borrowing. Further, nonprofit endowment is not found to increase leverage. Despite the unambiguous findings across varying definitions of leverage, the results also suggest that a “modified pecking order” is a more apt descriptor of nonprofit behavior.

Borrowing to Save

Borrowing to Save
Journal of Globalization and Development 102 (2), December 2010.

Jonathan Morduch

Poor families often borrow even when they have savings sufficient to cover the loan. The practice is costly relative to drawing down one’s own savings, and it seems particularly puzzling in poor communities.  The families themselves explain that it is easier to repay a moneylender than to “repay” oneself, an explanation in line with recent findings in behavioral economics.  In this context, high interest rates on loans can help instill discipline.  While workable, the mechanism is hardly optimal; options could be improved through access to a contractual saving device that helps savers rebuild assets after a major withdrawal.

Microfinance Games

Microfinance Games
American Economic Journal: Applied Economics 2(3): 60-95, July 2010.

Gine, Xavier, Pamela Jakiela, Dean Karlan, and Jonathan Morduch

Microfinance banks use group-based lending contracts to strengthen borrowers' incentives for diligence, but the contracts are vulnerable to free-riding and collusion. We systematically unpack microfinance mechanisms through ten experimental games played in an experimental economics laboratory in urban Peru. Risk-taking broadly conforms to theoretical predictions, with dynamic incentives strongly reducing risk-taking even without group-based mechanisms. Group lending increases risk-taking, especially for risk-averse borrowers, but this is moderated when borrowers form their own groups. Group contracts benefit borrowers by creating implicit insurance against investment losses, but the costs are borne by other borrowers, especially the most risk averse. 

A Philanthropy Tackles Growth In Health Costs At The State Level

A Philanthropy Tackles Growth In Health Costs At The State Level
Health Affairs, 29, no. 7 (2010): 1411-1414 

Sandman, D., & Kovner, A.

Slowing the rate of growth of health spending is as critical a goal at the state level as it is at the national level. Philanthropy can hardly address this issue alone, yet it has an obligation to take on big and seemingly intractable problems. The New York State Health Foundation is committed to stimulating innovative and replicable approaches to bending the cost curve.

This article describes how the foundation recently awarded six grants to support efforts related to payment reform, hospital re-admissions, medical malpractice reform, palliative care, and the quantification of other cost containment approaches that could be pursued atthe state level.

The Economics of Microfinance, 2nd edition

The Economics of Microfinance, 2nd edition
Cambridge, MA: MIT Press.

Beatriz Armendáriz and Jonathan Morduch


1 Rethinking Banking 

2 Why Intervene in Credit Markets? 

3 Roots of Microfinance: ROSCAs and Credit Cooperatives

4 Group Lending

5 Beyond Group Lending

6 Savings and Insurance

7 Gender

8 Commercialization and Regulation

9 Measuring Impacts

10 Subsidy and Sustainability

11 Managing Microfinance 

Economic Development Impacts of High-speed Rail

Economic Development Impacts of High-speed Rail
RCWP 10-007 June, 2010

Levinson, David

High-speed rail lines have been built and proposed in numerous countries throughout the world. The advantages of such lines are a higher quality of service than competing modes (air, bus, auto, conventional rail), potentially faster point-to-point times depending on specific locations, faster
loading and unloading times, higher safety than some modes, and lower labor costs. The disadvantage primarily lies in higher fixed costs, potentially higher energy costs than some competing modes, and higher noise externalities. Whether the net benefits outweigh the net costs is an empirical question that awaits determination based on location specific factors, project costs, local demand, and network effects (depending on what else in the network exists). The optimal network design problem is hard (in the mathematical sense of hard, meaning optimal solutions are hard to find because of the combinatorics of the possible different network configurations), so heuristics and human judgment are used to design networks.


Selective Knowledge: Reporting Bias in Microfinance Data

Selective Knowledge: Reporting Bias in Microfinance Data
Perspectives on Global Development and Technology.

Morduch, J. & Bauchet, J.

Answering surveys is usually voluntary, yet much of our knowledge depends on the willingness of households and institutions to answer. In this study, we explore the implications of voluntary reporting on knowledge about microfinance. We show systematic biases in microfinance institutions' choices about which survey to respond to and which specific indicators to report. The analysis focuses on data for 2,072 microfinance institutions from MixMarket and the Microcredit Summit Campaign databases for the years 2004-2006. In general, we find that financial indicators are more often reported than social indicators. The patterns of reporting correlate with the institutions' region of operation, mission, and size. The patterns in turn affect analyses of key questions on trade-offs between financial and social goals in microfinance. For example, the relationship between operational self-sufficiency and the percentage of women borrowers is positive in the Microcredit Summit Campaign data but negative in the MixMarket data. The results highlight the conditional nature of our knowledge and the value of supporting social reporting.

Medicare Payments, Health Care Services Use, and Telemedicine Implementation Cost in Randomized Trial Comparing Telemedicine Case Management With Usual Care in Medically Underserved Patients With Diabetes Mellitus

Medicare Payments, Health Care Services Use, and Telemedicine Implementation Cost in Randomized Trial Comparing Telemedicine Case Management With Usual Care in Medically Underserved Patients With Diabetes Mellitus
Journal of the American Medical Informatics Association

Palmas, W., Shea, S., Starren, J., Teresi, J.E., Ganz, M.L., Burton, T.M., Pashos, C.L., Blustein, J., Field, L., Morin, P.C., Izquierdo, R.E., Silver, S., Eimicke, J.P., Langiua, R.A. & Weinstock, S.

To determine whether a diabetes case management telemedicine intervention reduced healthcare expenditures, as measured by Medicare claims, and to assess the costs of developing and implementing the telemedicine intervention.
We studied 1665 participants in the Informatics for Diabetes Education and Telemedicine (IDEATel), a randomized controlled trial comparing telemedicine case management of diabetes to usual care. Participants were aged 55 years or older, and resided in federally designated medically underserved areas of New York State.
We analyzed Medicare claims payments for each participant for up to 60 study months from date of randomization, until their death, or until December 31, 2006 (whichever happened first). We also analyzed study expenditures for the telemedicine intervention over six budget years (February 28, 2000- February 27, 2006).
Mean annual Medicare payments (SE) were similar in the usual care and telemedicine groups, $9040 ($386) and $9669 ($443) per participant, respectively (p>0.05). Sensitivity analyses, including stratification by censored status, adjustment by enrollment site, and semi-parametric weighting by probability of dropping-out, rendered similar results. Over six budget years 28 821 participant/months of telemedicine intervention were delivered, at an estimated cost of $622 per participant/month.
Telemedicine case management was not associated with a reduction in Medicare claims in this medically underserved population. The cost of implementing the telemedicine intervention was high, largely representing special purpose hardware and software costs required at the time. Lower implementation costs will need to be achieved using lower cost technology in order for telemedicine case management to be more widely used.

Brandraising: How Nonprofits Raise Visibility and Money Through Smart Communications

Brandraising: How Nonprofits Raise Visibility and Money Through Smart Communications

Durham, Sarah

In the current economic climate, nonprofits need to focus on ways to stand out from the crowd, win charitable dollars, and survive the downturn. Effective, mission-focused communications can help organizations build strong identities, heightened reputations, and increased fundraising capability. Brandraising outlines a mission-driven approach to communications and marketing, specifically designed to boost fundraising efforts. This book provides tools and guidance for nonprofits seeking to transform their communications and marketing through smart positioning, branding, campaigns, and materials that leverage solid strategy and great creative, with a unique focus on the intersection of communications and fundraising.


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