5 research outputs found
Essays on Financing Decisions of Not-for-Profit Organisations
No full textChapter 1 novelly examines the nature of the interaction between private
donors and not-for-profit organisations (NPOs) when NPOs can invest endowment funds in a two-asset risky portfolio and donors can contribute to both the endowment fund and the annual campaign.
I study a three-stage non-cooperative game with two types of economic agents: a cohort of heterogeneous donors and one representative NPO. In equilibrium, donors always contribute to the endowment fund; however, they may not contribute to the annual campaign. The proportion of the NPO's endowment fund invested in the risky asset is a discontinuous function of the endowment; donors contribute less to an aggressive NPO and more to a cautious one. When the NPO can solicit donors to contribute only once, this increases the expected level of the contribution in equilibrium, but this may not generate higher expected utility for donors.
Chapter 2 presents a dynamic model of charitable giving. At each period, donors contribute to an NPO's endowment; the NPO provides a charitable good and invests in the financial market. Investments are made in a risky asset and a risk-free asset. I introduce two types of shocks to account for uncertainty: donors' income shock and financial market fluctuations.
I show that the optimal share of disposable endowment invested in risky asset is constant. Donors' strategy, whether to contribute or free-ride on the NPO's investments, depends on donors' shadow prices. Donors contribute when NPO's endowment is relatively low. Large contribution levels encourage the NPO to participate in the capital market at the expense of providing charitable good. I show that the NPO prefers an environment with a lower rate of return on risk-free assets. NPO's risk exposure to the financial market affects both NPO's and donors' decisions. However, risk exposures on donors' side do not impact parties' decisions. Regulation analysis suggests that portfolio ceiling and provision floor are achievable. Chapter 3 links two data sources: the National Center for Charitable Statistics (NCCS) data over the period of 1987-2014 and the U.S. presidential elections data. I develop a dynamic model to examine how the national-level political incumbent shapes the NPOs' risky investment portfolio selection, adjusting for a set of NPOs' intrinsic characteristics and real interest rate.
I find that right-leaning Republicans act as a rein on NPOs' risky investments, i.e., a
Republican administration is associated with a reduction in NPOs' holdings of corporation stocks and a 16.28% reduction in equity share relative to a Democratic administration. It is attributed to the impact of the Republican administration by more facilitating NPOs' accessibility to borrowing than having a Democratic president. I argue that NPOs behave as backward-looking investors or are reluctant to change their portfolio due to the significant portfolio adjustment cost, using past performance as an indicator to make their current risky investment decisions.
Heckman two-step estimation indicates that NPOs' investment is an endogenous sample selection instead of a random choice. I show that NPOs have a less extensive equity share with more severe agency costs; foundation size plays a different role when NPOs decide whether to invest in risky assets compared with investing NPOs. Moreover, for investing NPOs, the equity share is expected to decrease by 12.0% if there is a 1% increase in the real interest rate; NPOs are more inclined to invest in risky assets when the real interest rate increases, in the sense of riding with the rational bubble
Essays on Party Politics
No full textThis thesis comprises three essays on party politics. The first chapter discusses the strategic behavior of the central leadership and the grassroots organizations of a political party. The focus is on the degree of centralization of fundraising, which determines the locus of control over the nature of the party's platform. In a model of central and local fundraising, I show that (i) public and private funding at the central level crowd out the fundraising efforts of the national party's local organizations, leading to the centralization of power; and (ii) that there exists a collective action problem among local organizations as they attempt to free-ride on transfers from the center. The equilibrium degree of centralization under various conditions is simulated to develop testable hypotheses. Canadian data from 2005 to 2013 are then used to study the impact of central party funding on net transfers from the center to the party’s local organizations. The empirical results show that an increase in central party funding (e.g., public funding) increases net transfers, while higher funding by the national party negatively impacts local fundraising efforts.
In the second chapter, I develop a methodology to deal with continuous treatment levels within a regression discontinuity design, and I apply this to study the effect of public subsidies on fundraising. Introducing continuous treatment allows the estimation of a dose-response function for outcomes conditional on the level of treatment. Using this framework, I study empirically how public subsidies in Canada allocated to grassroots political organizations impact their private fundraising: in the Canadian case I explore, a local candidate who wins over 10% of the vote was eligible for reimbursement of 60% of his electoral expenses. The results uncover a crowding-out effect. Wealthier grassroots organizations exhibit a decrease in fundraising after receiving the reimbursement. A survival effect also appears as the poorer grassroots organizations are found to increase their fundraising activities following reimbursement.
Finally, the third chapter considers issues of randomness and unobserved heterogeneity that typically arise when using a regression discontinuity design (RDD) to study the incumbency effect, or indeed in any controlled experiment. In studies of incumbency, randomness depends on the selection of 'close' elections as typically measured by a 'small' winning vote margin. However, the voters' willingness to change their vote is a critical component of a better, volatility-adjusted, measure of winning margins. We study empirically how the use of volatility-adjusted instead of simple margins alters the outcome of an RDD analysis of incumbency for Canadian federal elections. Unobserved heterogeneity in the selection of constituencies used in such an analysis arises when the electoral readiness of a political organization - a potentially important determinant of its candidate's success - is not considered. We investigate empirically how allowance for the quality of the organizations contesting an election affects the outcome of an RDD study of incumbency over the history of federal elections. We find that adjusting for volatility alters conclusions about the exact magnitude of the incumbency effect while taking organizational quality into account eliminates the incumbency effect in the Canadian case
Stationarity of the Optimal Enforcement Contract in the Complete Information Case
No full textThis paper examines the stationarity of optimal contracts in infinitely repeated principal–agent relationships under complete information and enforcement constraints. We demonstrate that stationarity emerges as a robust feature of optimal contracts when agent types and actions are fully observable, and contract enforcement is supported by both public remedies and private termination threats. Under complete information, the trade-offs between enforcement costs and relational value become significantly simplified, resulting in stationary outcomes even when enforcement constraints are binding. These findings offer insights into contract design in environments where non-stationary profiles are either impractical or prohibitively costly
Optimal Contracts under General Mixed Constraints: Continuity, Structure, and Applications
No full textThis paper characterizes optimal contract structures under adverse selection when the principal faces a general class of mixed (involving allocation and transfer) constraints. We establish conditions for the existence and the continuity of the optimal allocation. We show that under regularity conditions, the optimal continuous contract features at most three distinct regions: segments where the constraint is slack and the allocation follows a modified Baron-Myerson path, alternating with segments where the constraint binds. Assuming non-generic cases are excluded, the binding constraint forces a constant allocation (bunching) over a range of agent types. Our analysis demonstrates how bunching can arise endogenously from optimal design under smooth constraints, distinct from exogenously induced behavioural responses documented empirically
Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy
No full textWe study the dynamic interaction between donors’ contributions and the investment strategies of a non-profit organization (NPO) amid fluctuating donor income and varying financial market conditions. The analysis reveals a consistent pattern in the NPO’s allocation strategy, directing a fixed proportion of its endowment toward higher-risk assets. Notably, increased donor support often correlates with the NPO’s heightened activity in financial markets, which can occasionally reduce the provision of charitable goods. A significant finding is the NPO’s preference for environments with lower returns on risk-free assets. Additionally, the study delineates the contrasting impacts of financial market uncertainties and donor income variations on the decision-making processes of both donors and the NPO; while market volatility significantly shapes strategies for both groups, fluctuations in donor income have minimal impact on their strategic decisions
