Abstract
At the time of introducing legally required disclosure of financial statements (FS) among Belgian nonprofit organizations (NPOs) in 2006, NPOs are found to increase their share of long-term and financial credit in total credit, relative to a control group of for-profits with unchanged disclosure requirements. Regarding FS format, NPOs filing the complete, audited FS format were able to increase their share of long-term and financial credit in the post-disclosure period, relative to a control group of NPOs filing the abbreviated, unaudited format. Rather than impacting total credit financing, expanded FS disclosure regulation seems to cause a shift in debt structure toward greater long-term and financial credit. This may increase NPOs’ financial stability and may alleviate their financing constraints. The results support the relevance of FS disclosure in the nonprofit sector.
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Notes
For the period under study, NPOs are considered large (very large) when at the end of the accounting year, at least two of the following three size criteria are exceeded: (1) five (fifty) average FTE employees, (2) total yearly revenues excluding VAT and extraordinary revenues of €312,500 (€7,300,000), and (3) total assets of €1,249,500 (€3,650,000). NPOs with, on average, more than 100 FTE employees, are considered very large regardless of the other criteria. Meanwhile, these size criteria have changed.
Relevant information for lenders that is only contained in the complete FS format relates to detailed information about financial participations in other organizations, maximum amount of guarantees provided by the NPO, detailed overview of the revenue mix (e.g., sales, contributions, donations and grants), detailed information related to debt maturity, and the share of debt for which additional guarantees are provided by government.
Amounts payable related to taxes, wages (including social security), advances received on contracts in progress and accrued charges and deferred income are not considered as separate credit types (nor considered being part of the credit types considered in this study). Nevertheless, they are included in the denominator of the dependent variables, being total debt.
Usually, the difference-in-differences approach implies that both the treatment and control group have no treatment in the pre-treatment period and only the treatment group receives treatment in the post-treatment period. In this study, however, the adopted logic is slightly different as our control group received treatment over the entire sample period. So, in our case the treatment group is compared with a control that received treatment already before.
Industries with fewer than 500 observations are clustered in a category “Other industries”.
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Acknowledgements
The authors would like to thank Ann Gaeremynck, Nathan Grasse, Mathieu Luypaert, Jann Goedecke, Kenneth De Becker, the participants of the ISTR PhD Seminar and ISTR International Conference of 2018 in Amsterdam, the participants of the 2018 European Auditing Research Network Symposium (EARNET) in Leuven, the participants and discussants of the Research Day in Accounting 2018 in Antwerp, and the participants, discussant and two anonymous reviewers of the European Accounting Association (EAA) conference of 2018 in Milan for their useful comments and suggestions on prior versions of this paper. The data that support the findings of this study are available from the corresponding author upon reasonable request.
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Lancksweerdt, L., Van Caneghem, T. & Reheul, AM. Mandatory Financial Statements Disclosure and Nonprofits’ Debt Structure: An Empirical Analysis. Voluntas 34, 787–798 (2023). https://doi.org/10.1007/s11266-022-00516-0
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DOI: https://doi.org/10.1007/s11266-022-00516-0