Measuring Organization Capital for Nonprofit Foundations

ABSTRACT This study introduces a measure of organization capital for nonprofit foundations and uses it to predict their performance in generating future donations. Using financial and operational data from 3,531 unique nonprofit foundations in China from 2011 to 2021, we find that higher organization capital consistently leads to increased donations across various donor types over the subsequent three years. These findings indicate that organization capital persists over time and significantly affects the future performance of nonprofit foundations in attracting donations. Moreover, cross-sectional analyses reveal that organization capital plays a more prominent role in attracting donations when political connections are limited, revenue streams are diversified, and financial reporting quality is low. Additionally, we find that organization capital is not affected by CEO departures, suggesting that it represents an inherent organization-specific measure rather than a manager-specific characteristic. JEL Classifications: M41; L31.