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J. Account. Public Policy 33 (2014) 127144

Contents lists available at ScienceDirect

J. Account. Public Policy

journal homepage: www.elsevier.com/locate/jaccpubpol

Web disclosure and the market for charitable

contributions q
Gregory D. Saxton a, Daniel G. Neely b,, Chao Guo c
a

Department of Communication, University at Buffalo, SUNY, 331 Baldy Hall, Buffalo, NY 14260, United States
Sheldon B. Lubar School of Business, University of WisconsinMilwaukee, 3202 North Maryland Avenue, Milwaukee, WI
53201, United States
c
School of Social Policy and Practice, University of Pennsylvania, 3815 Walnut Street, Philadelphia, PA 19104, United States
b

a b s t r a c t
Nonprot organizations face intense competition in the market for
charitable contributions. Increasingly, donation decisions are made
online, and organizations have responded by implementing substantive Internet disclosure and reporting regimes. We posit here
that the voluntary disclosure of nancial and performance information inherent in these regimes provides additional relevant
information to a broad array of market participants, and thus has
a positive impact on the receipt of charitable contributions. We test
our hypotheses on a random sample of 400 US nonprot organizations by building on the well established economic model of giving
(Weisbrod and Dominguez, 1986), in which donations serve as
the proxy for demand. Our central research question is thus: Are
donors willing to pay for Web disclosure? Results indicate a positive relationship between the level of charitable contributions and
the amount of disclosure provided by an organization on its website; however, performance and annual report disclosure are more
important than nancial disclosure, and performance disclosure
has the biggest impact in organizations that are less reliant on
donations.
2013 Elsevier Inc. All rights reserved.

The authors would like to thank Andrea Kelton, Amin Mawani, Dean Neu, Linda Parsons, Kate Ruff, and Gajie Maharaj for
helpful suggestions, as well as the participants at the 2009 annual meeting of the Association for Research on Nonprot
Organizations and Voluntary Action in Cleveland, the 2010 annual meeting of the American Accounting Association in San
Francisco, and the 2010 Workshop in Multidisciplinary Philanthropic Studies at Indiana University. Ashley Dean and Kenton
Anderson provided research assistance. Data are available from authors upon request.
Corresponding author. Address: Sheldon B. Lubar School of Business, University of WisconsinMilwaukee, Lubar Hall N320,
3202 North Maryland Avenue, Milwaukee, WI 53211, United States. Tel.: +1 414 229 4164; fax: +1 414 229 5999.
E-mail address: neely@uwm.edu (D.G. Neely).
0278-4254/$ - see front matter 2013 Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.jaccpubpol.2013.12.003

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1. Introduction
In the market for charitable contributions, organizations compete to raise funds from donors willing to help the organization fulll its social mission. In the United States alone, contributions to the
countrys 1.4 million registered nonprot organizations are delivered at the rate of $300 billion annually (Roeger et al., 2011). Donations effectively form a critical part of the nonprot revenue stream,
and the competition can be intense.
Since the 1990s, two concurrent trends have resulted in electronic disclosure assuming a greater
role in this competitive arena. First, as donors and grantmakers alike have placed greater emphasis
on results, accountability, and return on investment (e.g., Behn, 2001), the demand for organizational
data has gone up. Second, the supply of organizational information from charities, third-party rating
agencies, citizens, and the media has swelled in step with the rapid diffusion of websites, blogs, and
social media (e.g., Kent et al., 2003; Lovejoy and Saxton, 2012; McNutt and Boland, 1999). The Web has
thus become a key information channel to which prospective donors increasingly turn for information
on an organizations efciency, effectiveness, output, and governance (Gordon et al., 2009; Saxton,
2012).
These trends have rendered Web-based organizational disclosure an important component of the
nonprot information environment. Not only does such disclosure help organizations relay their effectiveness and type to potential donors but, in the aggregate, voluntary disclosure plays a key role in
maintaining market efciency and reducing information asymmetries. Yet despite its growing relevance, the Web disclosure-donations nexus has yet to receive any empirical or theoretical attention
in the literature.
Our core proposition is that Web disclosure facilitates the broad dissemination of donor-relevant
nancial and performance information. Because Web disclosure provides information and signals that
are useful to donors, we propose donors will be willing to pay, in the form of increased donations, for
quality information disclosed on nonprot Websites. And because it broadcasts that information
widely thus increasing the number of potential donors we expect relevant disclosure to be associated with aggregate levels of charitable contributions. In this paper we set out to develop and test a
comprehensive framework of such value-relevant Web disclosure. Specically, we posit that there are
two primary forms of value-relevant disclosure nancial disclosure and performance disclosure
and that voluntary disclosures in each of these areas will be associated with greater levels of charitable
contributions.
We test our hypotheses in a broad, representative cross-section of the US nonprot sector using a
random sample of 400 501(c)(3) nonprot organizations. Using a combination of website and IRS
Form 990 nancial data, we run a series of regressions to examine the relationship between charitable
contributions and Web disclosure mechanisms. Results indicate a positive relationship between the
level of charitable contributions an organization receives and the total amount of information disclosed in the prior period. However, these effects are not homogeneous across information type. Annual report disclosure and the magnitude of performance disclosure are both associated with
increased levels of charitable contributions, while the quantity of nancial information is not. Moreover, we nd evidence of a conditional relationship, with the effects of performance disclosure
decreasing with the level of donor dependency.
This paper makes several contributions to the literature. To start, it presents a theory of the relevance of disclosure particularly that conducted on the Web in explanations of aggregate levels
of donations. Disclosure thus serves as an extension to existing economic explanations (e.g., Weisbrod
and Dominguez, 1986) of charitable contributions, which have relied on fundraising as the sole informational channel. The economic model is further extended by the identication of an important moderating effect of levels of donor dependence. The study also makes a contribution in conceptualizing
and specifying two central dimensions of donor-relevant disclosure. Given our evidence here that
organizations that are more procient at online disclosure seem to fare better in the market for charitable contributions, our ndings also carry practical implications. Future research should consider our
nding that Web disclosure is a key determinant of outcomes in the market for charitable
contributions.

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The remainder of the paper proceeds as follows. In Section 2, we develop our theoretical arguments
and hypotheses. Sections 3 and 4 contain descriptions of, respectively, our method and our results.
Section 5 concludes with a discussion of the theoretical, conceptual, and practical implications of
the study.

2. Theory and hypotheses

Our arguments center around the fact that Web disclosure widely diffuses information that is relevant to current and potential donors, and thus contributes to the amount of donations an organization receives. Before presenting our theory and hypotheses, we review the literature on the role of
information in the charitable contributions market.

2.1. Nature and sources of information in the market for charitable contributions
Though the metaphor of a market for charitable contributions is useful, it is important to note the
differences between this market and, notably, the capital markets. For one, the market for charitable
contributions lacks the centralized trading venues characteristic of the stock market; it is highly
decentralized and unorganized. Moreover, in the charitable market, price, typically measured as the
cost to the donor to pay for a dollar of the organizations output (Weisbrod and Dominguez, 1986),
does not provide a signal regarding scarcity, as it does in the capital markets. Donation price is hence
not a function of external market demand; it is instead a function of internal organizational decisionmaking. Consequently, any information that becomes available about a particular nonprot does not
get incorporated into the price. There can thus be no analogue to the efcient-market hypothesis for
the charitable contributions market.
Without a market-driven price, nor a common unit of overall, non-nancial performance, comparatively little information is generated about any given nonprot organization, and the information
that is produced does not ow as rapidly as it does through the capital markets. Overall, the nonprot
sector is characterized by a weak information environment, with a considerable information asymmetry between donors and nonprots (Gordon et al., 2009). This is only exacerbated by the limited disclosure requirements implemented in most countries. In the United States, for instance, most
nonprots are only required to make available hard or electronic copies of their recent IRS Form
990 returns (Gordon et al., 2009). Even if a donor were to nd a copy of an organizations 990 form,
the amount of information available in it is limited in scope, containing mostly raw nancial data.
The donor who wants more detailed information, or information that goes beyond mere nancial gures, needs to look elsewhere.
Beyond the 990 form, to obtain information on an organization, donors could historically (that is,
before the opening of the Web in 1995) turn to the following two organizational sources: (1) a hardcopy of the organizations annual report, available to donors, members, those on mailing lists, and
those who visited the organization; and (2) the organizations fundraising campaigns. Given the limited dissemination of hardcopy reports along with data-gathering and measurement limitations, academics have generally looked at fundraising in attempting to examine the effects of information.
Notably, fundraising assumes the central informational role in the economic model of giving
(Weisbrod and Dominguez, 1986) that dominates scholarly examinations of charitable contributions
and which has served as a baseline model for dozens of empirical studies (see Jacobs and Marudas,
2009 for a review). In these models, fundraising serves as a proxy for information dissemination
and advertising with respect to the quality of the organizations outputs. In practically all studies,
fundraising expense obtains a signicant, positive association with levels of charitable contributions.
However, fundraising is in many ways an information channel with restricted capabilities. Fundraising reaches a limited number of donors typically those on fundraising lists and only at limited
times of the year typically during the period of each discrete fundraising campaign. Moreover, it is
not generally the donor who undertakes an active search for organizational information during the
campaign. Instead, the donor comes into contact with fundraising information through campaign-spe-

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cic phone calls, mass mailings, newspaper ads, or fundraising events. The donors information-gathering role may thus be relatively passive.
Finally, fundraising is also an expensive activity, one that if done too much can have a deleterious effect on the organizations nances. In an unconstrained maximization model, the optimal level
of fundraising occurs where the fundraising elasticity of demand equals the ratio of fundraising expenses to donations the point at which an additional dollar of fundraising would result in less than
an additional dollar in donations (Jacobs and Marudas, 2006). However, this observation conveys only
part of the equation. What is equally important in the calculation is the impact fundraising expenditures have on the price of giving: given that fundraising expenses directly decrease the current
amount available for spending on programs, ceteris paribus, the more resources an organization devotes to fundraising, the lower the efciency ratio and hence the higher the price of giving. As a result,
though it takes money to make money, given the well documented negative relationship between
price and donations (e.g., Weisbrod and Dominguez, 1986; Gordon et al., 2009; Jacobs and Marudas,
2009), the nonprot executive has to weigh the additional resources that might be acquired via a
fundraising campaign against the future resources that might be lost due to a higher price of giving.

2.2. Theory of web disclosure as a key donor-relevant information channel

It is within this context that disclosure especially that done electronically via the Web can serve
a vital role for nonprot organizations seeking to obtain charitable contributions. The rst reason is
the far-reaching democratization of information engendered by the diffusion of new media. Information generated, aggregated, acquired, or shared on the Web has been found to play a powerful role in
such diverse contexts as citizen uprisings (Gaffney, 2010), nancial markets (Clarkson et al., 2006),
consumer product word-of-mouth campaigns (Jansen et al., 2009), and disaster-relief efforts (Macias
et al., 2009). The collective evidence strongly suggests the Internet provides relevant, actionable information at the individual, organizational, and community levels. As a result, the Internet now forms a
key component of the nonprot information environment: more and more citizens are getting their
information from the Web, and in such a way that it is affecting how they volunteer with, give to,
and otherwise interact with charitable organizations (e.g., Ganda, 2011; Gordon et al., 2009; Guo
and Saxton, in press). In this environment, the direct provision of organizational information has taken
on greater primacy.
A second reason for disclosures efcacy lies in its voluntary nature; there is no requirement that
nonprots post nancial or performance information on their websites. The only disclosure requirement affecting US nonprots, as noted earlier, is that they make available their Form 990 return
but the organization can choose whether to make it available on their own website, on another website, or simply upon request. Yet Behn et al. (2010) found that only half of the largest nonprot organizations were willing to voluntarily release hard copies of audited nancial statements in response to
formal requests, hinting at the difculties entailed in accessing nancial information for even well
apportioned organizations. Given the considerable variability in willingness to disclose, nonprot
Web disclosure likely has a more powerful effect as a voluntary reporting tool than what has been
seen in for-prot rms (Debreceny et al., 2002; Kelton and Yang, 2008). Those nonprots that do disclose key organizational information are hence likely to differentiate themselves (Saxton and Guo,
2011) while simultaneously sending a signal to constituents that they are responsive and accountable
(Lee, 2004; Petrovits et al., 2011; Saxton and Guo, 2011). At the broadest level, then, Web disclosure is
a key element of nonprot accountability.
Third, beyond sending an accountability signal to constituents, Web disclosure conveys information
that is particularly valuable to donors. Through the voluntary disclosure of pertinent nancial and performance information, organizations are able to convey their efciency, accountability and, most
importantly, their effectiveness, to current and potential donors (Lee, 2004; Saxton et al., 2012). The
easy spread of information afforded by the diffusion of Web technologies thus helps to decrease the
information asymmetries that exist in the market for charitable contributions. Previously, it was difcult for prospective donors to overcome this asymmetry of information not only in terms of missionrelated performance but also nancial performance. The Internet has democratized such information,

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particularly through a broad array of nancial and nonnancial information directly supplied by organizations on their websites (Saxton and Guo, 2011).
The fourth and nal reason for the importance of Web disclosure is that the Web constitutes the
channel perhaps best suited to widely diffusing organizational information (Ganda, 2011; Gordon
et al., 2009). Web disclosure broadcasts relevant information to a wide audience. As noted earlier,
the efcient market hypothesis does not apply to the nonprot sector. When an organization discloses
information in an annual report that it makes available in its ofce, this information cannot be incorporated into price, which is an indicator of efciency, not scarcity. More importantly, such acts of
hard-copy disclosure do not mean the information will be disseminated rapidly, nor beyond a narrow range of constituents.
Nonprot organizations instead need a communication channel that will reach a broader array of
constituents; they need, in other words, an effective dissemination channel. The Web provides such a
channel. Web disclosure reaches large audiences, allows the organization to reach new often unknown audiences, and, by benet of visitors own networks, generates electronic word of mouth that
further diffuses organizational information (Clarkson et al., 2006; Ganda, 2011; Jansen et al., 2009;
Saxton, 2012). Web disclosure thus both conveys information and engenders wide diffusion of this
information. Web disclosure is not, in other words, simply something extra an organization might
do to reach some specialized (and, by implication, relatively unimportant) Internet audience.
Disclosure also conveys relevant information in a manner distinct from fundraising till now the
chief informational variable in models of charitable giving. First, on the donors part, unlike the passive
receipt of information described earlier involving fundraising, donors accessing organizational Websites are involved in active information-seeking behavior. Second, instead of being limited to discrete
time periods, as in fundraising campaigns, Web disclosure provides continuous information availability. Third, disclosure is less costly than fundraising. An overuse of disclosure will not lead to negative
effects on an organizations efciency ratio; the optimal level of fundraising is thus likely lower than
that for Web disclosure. This is not to say that disclosure is without risk. Too much disclosure can lead
to information overload and potentially alienate internal and external stakeholders as well as prospective donors. Poorly managed organizations, moreover, will fare badly by disclosing information, and all
types of organizations could inadvertently provide information that proves valuable to competitors
(Healy and Palepu, 2001). Fourth, the type and quantity of information available on the Web is different: in addition to advertising-like information, the organization can include more detailed analyses,
reports, and evidence on its website than in typical fundraising materials.
Lending sole primacy to fundraising is, therefore, an unnecessarily incomplete way of looking at
information dissemination in the market for charitable contributions. We argue the disclosure channel
has taken on an increasingly important role in the provision of information to nonprot investors.
We propose that, above and beyond the impact of fundraising, nonprot organizations making better
use of online disclosure mechanisms will fare better in the competition for donations. Our core theoretical proposition is that Web disclosure facilitates the receipt of charitable contributions because it
provides additional, valuable information, and disseminates that information broadly.
In line with existing regression-based economic-model-of-giving studies, our hypotheses are associational in nature. Our rst hypothesis relates to the association between disclosure and charitable
contributions. Differently put, our hypothesis concerns the value relevance of Web disclosures, and
our arguments here would benet from an explicit delineation of this idea in the nonprot context.
We start with Parsons (2003, p. 109) general denition that . . . not-for-prot nancial accounting reports are useful if they assist in the efcient allocation of donor capital to charitable organizations
and pair it with the capital-markets denition that an accounting amount is dened as value relevant
if it has a predicted association with equity market values (Barth et al., 2001, p. 3). Then, taking the
idea that donors are the nonprot analogue to investors in for-prot organizations, and building on
the idea of value for for-prot organizations as the amount the investment community is willing
to invest in equity for a rm, we dene a not-for-prots investment-related value as the aggregate
amount that donors are willing to invest in a nonprot organization. In brief, a nonprot organizations value to the investment communityto the collective of donorsis equal to the aggregate level
of charitable contributions received by the organization (the value to society as a whole, in contrast, is
the extent to which the nonprot meets its social mission). We thus suggest that information

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disclosed via the Web is value relevant to the extent it is associated with subsequent levels of donations, our proxy for the donor communitys assessment of the organizations value.
Based on the above rationale, we expect that the total amount of relevant disclosure made on the
organizations website will have a positive effect on the level of charitable contributions. Accordingly,
our rst hypothesis is,
H1. The level of charitable contributions will be positively associated with online disclosure.

2.2.1. What types of disclosure are relevant?

Thus far, we have argued that Web disclosure inuences charitable contributions by disseminating
value-relevant organizational information to the broadest array of current and potential donors.
Yet all types of disclosure are not equal; there could be important differences in the inuence of different types of disclosed information. Our remaining two hypotheses thus explore the potential effects
of different dimensions of value-relevant disclosure.
There has been scant research either on what types of information donors want or the types of
information nonprot organizations choose to disclose via the Web. Keating (2007, p. 2) lamented
that, . . . relatively little organizational, nancial, and performance information is available about
the nonprot sector and thus called for the creation of an electronic marketplace for charitable contributions where such information would be made available. In a unique study conducted during the
pre-Internet era, Hyndman (1991) pointed out the stark differences in what information donors
wanted and what they were receiving; his survey data effectively showed a relevance gap in the
information provided by the typical charity. Donors wanted, but were not getting, a meaningful
mix of nancial and non-nancial information not only administrative costs and efciency ratios
but also goals, output and areas of need. Experimental research (Buchheit and Parsons, 2006; Parsons,
2007) likewise suggests that donors may be inuenced by indicators of both nancial efciency and
mission-related performance. Reck (2001) found analogous results in the governmental setting.
In effect, though empirical data have been scarce, prior research suggests donors are inuenced by
the release of both nancial and non-nancial information. Building on these ideas, Saxton and Guo
(2011) inductively developed a mission- and accountability-based framework of voluntary Web disclosure. They found all relevant information disclosed online could be grouped into two main categories nances and performance that dovetailed with nonprot organizations two primary areas of
accountability, accountability for nances and accountability for performance, which dominate the existing scholarly and practical discussions (Behn, 2001; Brinkerhoff, 2001). In the present study we adopt
this framework and delineate disclosureand our subsequent hypothesesinto nancial and performance dimensions. In general terms, a nonprot organizations Web disclosure practices are any online reporting mechanisms that serve to demonstrate nancial and mission-related performance.
2.2.2. Financial disclosure
Our second hypothesis concerns online nancial disclosure, which we conceptualize as the extent
of nancial accounting information a nonprot organization discloses on its website. Such disclosure
aims at demonstrating accountability for nances, which concerns tracking and reporting on allocation, disbursement, and utilization of nancial resources, using the tools of auditing, budgeting, and
accounting and deals with compliance with laws, rules, and regulations regarding nancial control
and management (Brinkerhoff, 2001, p. 10). In the online environment, this involves posting such
content as budgeting materials, reporting on the utilization of nancial resources, and compliance-related documentsincluding information on fund investment, management and spending policies;
investment philosophies; audited and unaudited nancial reports; IRS 990 forms; overhead costs;
codes of ethics and conict-of-interest policies; and adherence to best practice standards (Saxton
and Guo, 2011).
We expect the online disclosure of such information to strongly inuence charitable giving. Not
only do survey (Hyndman, 1991), experimental (Parsons, 2007) and analytical research (Zhuang
et al., in press) directly suggest that donors value and use such information in their donation decision-making, but a large body of empirical research using 990 and similar data provides indirect evi-

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dence via the consistently strong link shown between nancial numbers and aggregate donations
(e.g., Gordon et al., 2009; Greenlee and Brown, 1999; Jacobs and Marudas, 2009; Tinkelman and Neely,
2011; Yetman and Yetman, 2003). Our second hypothesis is thus,
H2. The level of charitable contributions will be positively associated with online nancial disclosure.

2.2.3. Performance disclosure

In contrast to the sizeable body of research on the impact of nancial efciency ratios, previous
empirical research has brought little evidence to bear on donors preferences for information on organizational effectiveness. Effectiveness refers to the second dimension of nonprot accountability,
accountability for performance, which refers to demonstrating and accounting for performance in light
of agreed-upon performance targets, with its focus on services, outputs, and results (Brinkerhoff,
2001, p. 10). This distinction between the nancial and performance dimensions is critical. In publicly
traded for-prot organizations, the ultimate strategic goal is to acquire prots and market share while
enhancing shareholder wealth (see, for example, Porter, 1980). In nonprot organizations, in contrast,
nancial outcomes are merely a means to an end. The ultimate strategic goal is fulllment of a social
missionthe creation of public value (e.g., Moore, 2000). Nonprots performance must therefore be
evaluated in terms of the mission-related targets and goals the organization sets (Ebrahim, 2003)
and the results it achieves in trying to reach those goals. Accordingly, we conceptualize performance
disclosure as the extent of goal- and outcome-oriented information a nonprot organization discloses
on its website. It involves an organization making available online any information, rst, on what it is
trying to achievesuch as its mission statement, vision, values, plans, and goalsand, second, on what
it has achieved in terms of outputs, outcomes, and broader community impacts.
Despite the abundance of anecdotal evidence, there exists little empirical evidence on the effects of
performance information in the charitable contributions market. There are compelling reasons why
such information might be expected to have an effect. The primary reason is that, unlike in the capital
markets, where investors seek to maximize monetary returns from their investment, in the contributions market what most donors are looking for is to maximize community impact (Gordon and Khumawala, 1999), and to do this they need information about the organizations ability to achieve
mission-related performance. Experimental (Parsons, 2007) and survey research (Hyndman, 1991)
corroborate this supposition in providing considerable evidence that donors prefer to examine performance-related indicators. In addition, the desire to access performance data dovetails with the increased emphasis on performance and results in the public and nonprot sectors that began in
the 1990s (e.g., Heinrich, 2002). Nonprot leaders have thus called for development of [Web]sites
by nonprots to tell the story of their organizations beyond the dry nancial categories (Pratt,
2004) and for provision of information by foundations on their priorities and programs beyond
the IRSs 990 form (Lee, 2004). Accordingly, we hypothesize that organizations that make performance-related information available on their website will be more likely to receive higher levels of
subsequent donations:
H3. The level of charitable contributions will be positively associated with online performance
disclosure.

3. Method
3.1. Sample
To investigate the prevalence and outcomes of Web-based organizational disclosure, we employ a
random sample of 400 US nonprot organizations in 2007 and 2008. This sample allows us to investigate the effects of Web disclosure in a broad, representative cross-section of organizations. Specically, as summarized in Table 1, our sample comprises a stratied random sample of 400 US nonprot
organizations drawn from the population of over 250,000 organizations with 2007 Form 990 501(c)(3)

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Table 1
Sample selection.
Criteria
a

501(c)(3) organizations in 2007

Stratied random sample of nonprotsb
Organizations without a website in 2007c
Organizations without valid 2007 Internet Archive datac
Sample of organizations with website in 2007
Organizations with missing or invalid nancial informationd
Final sample

Number

Percent

256,242
400
(63)
(13)
324
(17)

100%
(16)
(3)
81%
(4)

307

77%

a
This IRS code section provides for an exemption from federal income tax and allows donors to these organizations to deduct
their donation on their federal income tax return. To qualify for 501(c)(3) exemption, an organization must be organized to
operate exclusively for one or more of the following purposes: charitable, religious, educational, scientic, literary, testing for
public safety, fostering national or international amateur sports competition, and/or the prevention of cruelty to children or
animals. Our starting population is all 2007 Form 990 records available from Guidestar.
b
We obtained a stratied random sample of four hundred organizations from the population of reporting scal year 2007
organizations from Guidestar. We acknowledge the assistance of Diana Knight, data service coordinator at Guidestar, who
generated the stratied random sample from the 256,242 2007 Form 990 501(c)(3) records. Our strata were based on the ratio
of fundraising expenses to total expenses and were represented by four categories: zero reported fundraising expenses,
between zero and ve percent, ve to ten percent, and greater than ten percent. The population of records in each stratum were:
161,929 zero-fundraising organizations, 51,749 zero to ve percent, 19,409 ve to ten percent, 23,155 greater than ten percent.
One hundred nonprots were randomly selected from each stratum.
c
We attempted to access and code the website disclosures of all four hundred organizations. We utilized the Internet Archive
Wayback Machine (http://www.archive.org) to access each organizations website from the fall of 2007.
d
Missing values of age, size, and price as well as zero values of size and price are deleted.

records. Our strata were based on the ratio of fundraising expenses to total expenses and were represented by four categories: zero reported fundraising expenses, between zero and ve percent, ve to
ten percent, and greater than ten percent. 100 nonprots were randomly selected from each stratum.
To support the generalizability of our ndings, we test whether our sample is representative of the
population of nonprots. We compared our sample with the population of nonprot organizations included in the 2007 Guidestar Core le that had 2007 scal year data (n = 247,189). Specically, we
conducted a series of t-tests to determine whether there were any signicant differences in terms
of total revenue, total expenses, fundraising expenses, total end of the year assets, or total contributions. These tests revealed no signicant differences for any of the characteristics between our sample
and the population as a whole.
From the initial 400 organizations, after removing organizations with no website in 2007 (n = 63),
invalid or missing 2007 website data (n = 13), and missing nancial information (n = 17), we arrived at
a nal total sample of 307 organizations for our analyses. These organizations represent a broad crosssection of the US nonprot sectoralmost 200 different 3-digit National Taxonomy of Exempt Entities
(NTEE) codes are represented. The average organization in the sample was 22 years old in 2007, had
assets of $9.6 million, and derived 29% of its revenues from direct public support. $1.1 million of its
revenues were in the form of contributions (ranging from $0 to $73 million), $1.1 million in government grants, $900,000 in other revenues, and $2.8 million in program revenue; $0.66 of every dollar
in revenues was spent on programs, for an average price of giving of $1.51.
3.2. Model specication
Our aim is to see whether Web disclosure has an effect above and beyond existing explanations.
Consequently, to test for the effects of nancial and performance disclosure on charitable giving,
we take as our base the well established economic model of giving (Weisbrod and Dominguez,
1986). Using an analogue to for-prot models, the model posits demand as a function of price, quality,
and advertising. Specically, donations serve as the proxy for demand for the nonprot organizations
output, the price of donations is an efciency measure that approximates the cost to the donor to buy
one dollar of the nonprots output, quality is proxied by the age of the organization, and an advertis-

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ing, or informational, role is lled by fundraising. Together, price, age, and fundraising serve to determine the level of charitable contributions a nonprot organization receives.
Variants and extensions of the Weisbrod and Dominguez price-age-fundraising model have been
employed in several dozen studies to date (see Jacobs and Marudas, 2009 for a review). Throughout
these studies, the core of this parsimonious model has proven highly robust. In line with these studies,
we propose the following theoretical model as the basis for our empirical tests:

lnDonationsi;t1 b0 b1 lnPriceit b2 lnFundraisingit b3 lnAgeit cX it dDisclosureit eit 1

where Donations represents subsequent-year charitable contributions; Price indicates the price of
donations; Fundraising indicates fundraising expenses; Age is the age of the organization in years; X
is a vector of size, revenue, and industry controls (specied below) that have been identied as important in recent research; and Disclosure represents a series of measures of nancial and performance
disclosure. Eq. (1) thus represents the economic model of giving, considering the additional incremental effects of nancial and performance disclosure on subsequent direct public support. We now describe the data-gathering and measurement procedures used to operationalize the model for our
empirical tests.
3.2.1. Dependent variable
The dependent variable, lnDonations, is the natural log of subsequent-year charitable contributions,
as derived from 2008 FY Form 990 data. This levels approach to modeling the donations variable is
consistent with prior literature (e.g., Tinkelman and Neely, 2011; Gordon et al., 2009).
3.2.2. Economic model of giving and control variables
Data for these variables are based on 2007 FY Form 990 data. First, we operationalize the three core
variables from Weisbrod and Dominguez (1986) economic model of giving: Fundraising, measured as
.

Expense
fundraising expenses; Age, the age of the organization in years; and Price, dened as 1 Program
.
Total Expense
Price is the inverse of the well known program expense ratio, and takes into account that organizations
can devote resources to programs (i.e., output) only after expenditures are made on fundraising and
general administration; for example, in an organization that devotes 20% of expenses to fundraising
and administration, leaving 80% for program expenses, the price for the donor to buy $1 of output will
be $1.25.
Consistent with more recent extensions of the economic model of giving (e.g., Ganda, 2011; Gordon et al., 2009; Jacobs and Marudas, 2009; Tinkelman and Neely, 2011), we also include a series of
revenue source, size, and industry controls: Size, measured as total end-of-year assets; Donor Dependence, the proportion of revenues from contributions; Government Grants, revenues from government
grants; Program Revenue, revenues from program services; and Other Revenue, revenues from other
sources. We also include a series of seven dummy variables, based on NTEE codes, to tap the organizations industry: Arts, Education, Environment and Animals, Health, Human Services, International, and
Public Benet. Consistent with prior studies, we take the log of each continuous variable to help normalize the distribution.
3.2.3. Independent variables disclosure of nancial and performance information
The key independent variables are those that tap the organizations disclosure of donor-relevant
nancial and performance information. To nd instances of Web disclosure, our data-gathering method involved a multi-coder analysis of the complete content of each organizations website. We utilized
the Internet Archive WayBack Machine (http://www.archive.org/web/web.php) to access each organizations website from fall 2007. Scholarly research has validated the WayBack Machine (e.g., Murphy
et al., 2007), and it is increasingly seen as a source of admissible evidence in legal cases (Eltgroth,
2009). Due to robots.txt exclusions written by webmasters of a few of the sites, we were unable to access the 2007 websites for 13 of the 400 organizations. In all other cases, we were able to access the
data or conrm that the organization did not have a website in 2007. In total, we gathered disclosure
data on the 324 (out of 337) organizations that had websites in 2007.

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Once we accessed a website, we searched for and coded any website content that conformed to our
conceptualizations of nancial and performance disclosure as noted in Section 2. Beginning deductively with these theoretically grounded conceptualizations of the types of content implied by nancial and performance disclosure, along with ndings from a study of accountability in US community
foundations (Saxton and Guo, 2011), we approached the coding inductively, given that we did not
know precisely which features (some of which might be unique to the Web) we would nd under each
of these categories. In line with the existing literature and theory described earlier, we operationalize
four disclosure measures one each for performance disclosure, nancial disclosure and annual report
disclosure, and one composite disclosure index.
3.2.3.1. Financial disclosure index. To measure nancial disclosure, we coded content found anywhere
on the website targeted at demonstrating nancial responsibility, as outlined in our earlier theoretical
review. We dene our nancial disclosure index, Financial Disclosure, as the total number of nancial
disclosure items on each organizations website. Specically, letting Itemi = 1 if the ith item appears on
a organizations website, and Itemi = 0 otherwise, then

Financial Disclosure

m
X

Itemi ;

i 1; 2; . . . ; m

i1

3.2.3.2. Performance disclosure. In the area of performance disclosure, we coded any material on the
website related to the organizations fulllment of its social mission. In line with our theory, such disclosure includes any information related to the nonprots mission, or what it is trying to achieve,
along with its impact, or the outputs, outcomes, and broader community effects of its activities.
Our Performance Disclosure index is dened as the total number of these performance items on each
organizations website. Specically, letting Itemi = 1 if the ith item appears on a organizations website,
and Itemi = 0 otherwise, then

Performance Disclosure

m
X
Itemi

i 1; 2; . . . ; m

i1

3.2.3.3. Annual report disclosure. Third, we create a binary variable to indicate organizations that post a
recent annual report. Along with the 990 form, the annual report is traditionally the key vehicle for
organizational disclosure (Cummings et al., 2010), and is hence one of the most important items an
organization can disclose on its website. Moreover, the annual report typically includes both nancial
and performance information, rendering it problematic to denote it as only one form or the other. In
our analyses we thus consider annual report disclosure separately from the above indices; we code
Annual Report as a discrete measure, assigning each organization a value of 1 if the annual report is
disclosed on the website, 0 otherwise.
3.2.3.4. Total disclosure. We also create a composite measure of organizational disclosure. Total Disclosure comprises the sum of the performance disclosure index, the nancial disclosure index, and the
annual report disclosure binary variable.
4. Empirical ndings
4.1. Disclosure on nonprot organization websites
Our website content analyses showed that 84% of the organizations in the sample maintained a
website at the end of 2007. Of those with a website, 72% had at least some performance-related disclosure and 12% disclosed nancial items. Specically, we found 13 discrete types of nancial and performance items disclosed on the organizations websites. Table 2 shows the proportion of
organizations in the sample that disclose each of the 13 items. Four of them (audited nancial statements, Form 990, efciency info, and other nancial) are related to nancial accountability, while

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137

Table 2
Proportion of organizations with various website disclosure items.
Disclosure item

Proportion of organizations with disclosure item

Annual report

14.66

Financial disclosure
Audited nancials
Efciency info
Financial (other)
Form 990
Performance disclosure
Mission
Vision
Values
Goals
Outputs
Strategic plan
Stories or testimonials
Performance (other)

3.91
2.93
3.91
3.91
61.24
13.68
6.51
5.86
9.45
2.61
3.26
1.63

Note: Percentages shown are for the 307 nonprots in the sample with a website.

eight (mission, vision, values, goals, outputs/outcomes, strategic plan, client stories and testimonials,
and other performance) are related to performance. The nal item is the annual report, which spans
both the nancial and performance areas. An inter-coder reliability test was conducted based on a
multi-coder review of 20% of the 400 organizations. The test revealed close to 95% inter-coder agreement and a strong Cohens kappa score of .91.
In line with the measurement strategy described in the previous section, we used these data to create four discrete disclosure variables for inclusion in the multivariate analyses. Financial Disclosure is
the sum of the four nancial disclosure items, Performance Disclosure is the sum of the eight performance disclosure items, Annual Report is a binary variable indicating whether the organization discloses the annual report, and Total Disclosure is the sum of the nancial, performance, and annual
report disclosure variables. Table 3 contains descriptive statistics for these and other model variables.
As shown in the table, the average organization discloses 1.3 total items on its website, including one
performance item, while the majority of nonprot organizations disclose neither nancial information
nor an annual report. Overall, disclosure levels are low, raising serious questions about the average
organizations commitment to transparency.
Table 4 contains zero-order correlations for the model variables. The correlations in Table 4 support
the notion that disclosure is associated with contributions. Specically, a positive and signicant correlation exists between contributions and total disclosure, performance disclosure, and annual report
disclosure. Only the correlation between nancial disclosure and contributions is not statistically signicant. Moreover, disclosure items are correlated, as there is a positive and signicant association between total disclosure, performance disclosure, annual report disclosure, and nancial disclosure.

4.2. Multivariate results

Table 5 shows our results from a series of regressions on the log of subsequent-year donations.
Each regression includes the base economic model of giving along with the revenue source, size, revenue concentration, and industry controls that have been identied as important in the literature (e.g.,
Jacobs and Marudas, 2009; Tinkelman and Neely, 2011). Each of the four models then adds either our
aggregate disclosure variable or the disaggregated set of nancial, performance, and annual report disclosure variables. All models include robust standard errors. In two of the models a series of interactive terms is added to test for a conditional relationship with donor dependence. We thus look at four
models that tap, collectively, the effects of nancial, performance, annual report and total disclosure,
both with and without controlling for the moderating effects of the level of donor dependence.

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Table 3
Summary statistics.

Contributionst+1
Pricet
Fundraisingt
Aget
Sizet
Donor Dependencet
Government Grantst
Program Revenuet
Other Revenuet
Total Disclosuret
Performance Disclosuret
Financial Disclosuret
Annual Report Disclosuret

Count

Mean

SD

Min.

Max.

366
366
366
366
366
366
366
366
366
307
307
307
307

1,096,020
1.51
108,332
21.60
9,601,603
0.29
1,126,113
2,801,640
914,801
1.34
1.04
0.15
0.15

4,297,300
1.33
279,102
17.30
49,300,000
0.36
17,600,000
24,800,000
4,430,135
1.15
0.86
0.44
0.35

0
1
0
0
2392
0
0
0
0
0
0
0
0

73,100,000
16.87
3,831,935
75
600,000,000
1
336,000,000
378,000,000
60,600,000
6
4
3
1

Contributions = subsequent-year charitable contributions; Price = donation price, 1/(Program Expense/Total Expense); Fundraising = fundraising expenses; Age = organization age in years; Size = total assets; Donor Dependence = proportion of revenues
from contributions; Government Grants = revenues from government grants; Program Revenue = revenues from program services; Other Revenue = revenues from other sources; Total Disclosure = summative disclosure index (performance disclosure + nancial disclosure + annual report disclosure); Performance Disclosure = summative index of performance disclosure
items; Financial Disclosure = summative index of nancial disclosure items; Annual Report Disclosure = 1 if annual report disclosed, 0 otherwise.

Table 4
Zero-order correlation matrix.
1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Contributions
Price
Fundraising
Size
Donor
Dependence
Government
Grants
Program
Revenue
Other Revenue
Age
Total Disclosure
Performance
Disclosure
Financial
Disclosure
Annual Report
Disclosure

1
0.03 1
0.54** 0.19** 1
0.13* 0.21** 0.09 1
0.40** 0.00 0.40** 0.24**
0.16*
0.05

0.12*

10

11

12

13

0.08

0.28** 0.02

0.15** 0.00

0.44** 0.07

0.37**

0.30** 0.25**
0.35** 0.01
0.22** 0.15**
0.12*
0.10

0.05
0.21**
0.27**
0.16**

0.01
0.29**
0.09
0.07

0.15*
0.14*
0.27**
0.22**

0.04
0.18**
0.07
0.01

0.14**
0.10
0.23**
0.15**

0.08

0.06

0.16** 0.20**

0.17** 0.12*

0.19** 0.18*

0.04

0.24** 0.11

0.33**

0.02
0.13*

1
0.35** 1
0.07 0.12*
0.07 0.01
0.00
0.08

0.11*

1
0.86** 1
0.11*

0.51** 1

0.22** 0.22** 0.53** 0.16** 1

Contributions = log of subsequent-year charitable contributions; Price = log of donation price, 1/(Program Expense/Total
Expense); Fundraising = log of fundraising expenses; Size = log of total assets; Donor Dependence = proportion of revenues from
contributions; Government Grants = log of revenues from government grants; Program Revenue = log of revenues from program
services; Other Revenue = log of revenues from other sources; Age = log of organizations age in years; Total Disclosure = summative disclosure index (performance disclosure + nancial disclosure + annual report disclosure); Performance Disclosure = summative index of performance disclosure items; Financial Disclosure = summative index of nancial disclosure items;
Annual Report Disclosure = 1 if annual report disclosed, 0 otherwise.
*
p < 0.05.
**
p < 0.01.

All models in Table 5 are signicant, with adjusted R2 ranging from 0.36 to 0.38. Consistent with
prior literature, price is signicant and negative in all models, while Fundraising is consistently positive. Interestingly, Age and Size are not statistically signicant.

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Table 5
OLS regressions, dependent variable is log of subsequent-year donations.
Model 1
Price
Fundraising
Age
Size
Donor Dependence

1.83
(2.37)
0.33***
(4.67)
0.43
(1.77)
0.12
(1.02)
2.82***
(4.10)

Fundraising  Donor Dependence

Total Disclosure

0.44*
(2.31)

Total Disclosure  Donor Dependence

Model 2
*

1.74
(2.25)
0.34***
(4.47)
0.46
(1.95)
0.15
(1.26)
6.05*
(2.46)
0.11
(0.48)
0.99***
(3.84)
1.49*
(2.39)

Model 3
*

Model 4

1.80
(2.34)
0.32***
(4.68)
0.43
(1.73)
0.08
(0.68)
2.87***
(4.10)

1.75*
(2.21)
0.32***
(4.58)
0.44
(1.82)
0.11
(0.98)
4.94***
(4.12)

0.51*
(2.22)
0.58
(1.08)
1.38***
(3.73)

Additional Controls

Yes

Yes

Yes

1.01**
(2.99)
0.25
(0.32)
1.68**
(3.05)
1.56*
(2.40)
1.55
(0.97)
0.75
(0.77)
Yes

N
Adj. R2
F

307
0.36
11.96***

307
0.38
12.03***

307
0.37
12.05***

307
0.38
12.51***

Performance Disclosure
Financial Disclosure
Annual Report Disclosure
Performance Disclosure  Donor Dependence
Financial Disclosure  Donor Dependence
Annual Report Disclosure  Donor Dependence

t statistics in parentheses based on robust standard errors.

Price = log of price, 1/(Program Expense/Total Expense); Fundraising = log of fundraising expenses; Age = log of the organizations age in years; Size = log of total assets; Donor Dependence = proportion of revenues from contributions; Total Disclosure = summative disclosure index; Financial Disclosure = summative index of nancial disclosure items; Performance
Disclosure = summative index of performance disclosure items; Annual Report = 1 if annual report disclosed. Additional Controls refers to series of dummy variables indicating subsector code (e.g., Arts, Education) along with three revenue source
controls tapping revenues from government grants, programs, and other revenues, respectively.
*
p < 0.05.
**
p < 0.01.
***
p < 0.001.

In Hypothesis 1 we proposed that Web disclosure would be positively associated with the level of
charitable contributions. To test this hypothesis, Model 1 incorporates our summative index Total Disclosure. As seen in Table 5, more disclosure is associated with higher levels of subsequent-year contributions. In the aggregate, then, and controlling for revenue source, size, donor dependence, and
industry, there appears to be a strong positive relationship between disclosure and donations. Thus
Hypothesis 1 is strongly supported.
In Model 2 we then test whether the informational effects are conditional on the organizations
reliance on donations. There is evidence of a link between donor dependence and disclosure; for instance, Behn et al. (2010) found that, the higher the contribution ratio, the more likely large nonprots
were to voluntarily provide audited nancial statements when asked. By extension, one might expect
organizations more reliant on donations to invest more in informational activities, including fundraising, disclosure, and word of mouth, and to thus generally be more recognized in the market for contributions. In such cases, there might be diminished returns to disclosure the greater the level of donor

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dependence, such that contributors to donor-dependent organizations may nd disclosures relatively

less value-relevant in their donation decision. In any event, though the directionality is not clear, the
relationship between information production and donations may be conditional on the level of donor
dependence. For this reason, in Model 2 we interact the two informational variables Fundraising
and Total Disclosure with Donor Dependence. The results suggest that the more dependent organizations are on contributions, the less effective disclosures become, as evidenced by the negative coefcient on the interaction between Total Disclosure and Donor Dependence. By contrast, the effectiveness
of organizations fundraising efforts is not sensitive to the degree an organization is reliant on
contributions.
Thus far, we have found evidence consistent with the proposition that overall levels of disclosure
have a positive effect on the receipt of charitable contributions. To examine whether one of the dimensions of disclosure is more relevant than the other, in Models 3 and 4 we replicate the above analyses
(Models 1 and 2), replacing Total Disclosure with our three disaggregated measures of Financial Disclosure, Performance Disclosure, and Annual Report Disclosure. We nd that, when total disclosure is disaggregated into its various components, that performance disclosures and the annual report are
associated with greater subsequent-period contributions, while nancial disclosures are not.
While Model 3 provides strong support that performance disclosures are associated with incremental subsequent contributions, and that nancial disclosures are not, this result might be driven
by the subset of nonprots that are relatively less reliant on donor support; Model 3 does not account
for this potential conditional relationship between disclosure and donor dependence. Consequently, in
Model 4 we re-run the Model 3 analysis, incorporating interactive terms between donor dependence
and the three disclosure variables. Consistent with our nding in Model 2, the coefcient on the performance interaction term is negative and statistically signicant, suggesting that more donor-dependent organizations are less sensitive to the level of performance disclosure. This effect is not observed
for nancial disclosures nor the annual report.
4.2.1. Counterfactuals
To show the practical impact of our ndings, Fig. 1 shows the counterfactual effects of disclosure on
charitable contributions. Based on the main regression (Model 4) in Table 5 with the complete set of
disclosure indices as well as the interactions with donor dependence, the gure shows the expected
level of charitable contributions at various levels of performance and annual report disclosure, holding
price, fundraising, age, and all control variables constant at their means.
Fig. 1 shows that expected donations are considerably higher for organizations that implement voluntary Web disclosure regimens than for those that do not. The expected level of contributions for an
organization with no performance disclosure and no annual report disclosure is about $22,000, while
for an organization with annual report disclosure and the maximum level of performance disclosure it
is roughly $6.6 million. In short, even after controlling for size, fundraising, and other control variables
identied in the literature and included in our model, the effects of disclosure appear to be
considerable.
The gure also suggests that both annual report disclosure and performance disclosure yield a substantial return for charitable organizations. Ceteris paribus, the increase in aggregate charitable contri-

Fig. 1. Expected charitable contributions at various levels of disclosure. Note: Each entry is the expected level of charitable
contributions for given congurations of performance and annual report disclosure, holding all other variables in Model 4
constant at their means. The dependent variable, lnContributionst+1, is given an exponential transformation to yield the dollar
amounts shown. Min and Max refer to the minimum and maximum values of the performance disclosure index. Results
derived using Zelig, an R package that uses Monte Carlo simulation to estimate quantities of interest (Imai et al., 2007).

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butions is, on average, $1,564,197 for moving from the minimum (0) to maximum (4) levels of performance disclosure and $275,231 for disclosing an annual report (these numbers not shown in Fig. 1;
they are calculated holding annual report disclosure and performance disclosure, respectively, constant at their mean values).

4.2.2. Sensitivity tests

Analysis previously discussed establishes a clear link between contributions received by the organization and the level of total disclosure, the level of performance disclosure, and annual report disclosure. In the main analysis, we only considered the organizations that had a website. To test
whether our results are sensitive to including organizations without a website, we run our models
on all sample organizations with available nancial data and replacing missing disclosure data with
zero values. Running our models on this larger sample of 366 organizations yields similar results
for our total disclosure and performance disclosure variables. Interestingly, the annual report variable
is no longer signicant. Overall, our ndings on total disclosure and performance disclosure are not
sensitive to inclusion of organizations without a website.
We also test the sensitivity of the analysis to utilizing total contributions in lieu of all other contributions as the dependent variable. The results are qualitatively similar to those reported in Table 5.
Specically, total disclosure, performance disclosures, and the annual report continue to be statistically signicant while nancial disclosures are not. The interaction terms maintain their sign and signicance, with relatively more donor-dependent organizations less sensitive to total disclosure and
performance disclosure.
Finally, we test whether our ndings our sensitive to outliers. We reran the four models reported in
Table 5, rst running robust regressions, utilizing the mregress command in Stata, and then quantile
regressions. All of our ndings continue to be statistically signicant, with the exception of the coefcient on the performance disclosure index in Model 3. However, both the main effect as well as the
interaction effect for performance disclosure remain signicant for Model 4.

5. Discussion and conclusions

In this paper we have presented a theory of Web disclosure as a key information channel in the
market for charitable contributions. Our core theoretical proposition is that Web disclosure disseminates valuable information to a broad array of current and potential donors. Organizations that make
greater use of online disclosure tools will thus fare better in the market for charitable contributions.
With the recognition that our regression-based tests are associational in nature, our evidence suggests
the Web has become a critical component of the nonprot information environment. Specically, our
study suggests that, in the market for charitable contributions, Web disclosure plays an additional
informational role beyond that of fundraising. This is in contrast to much of the existing economics-based research, which has assumed fundraising plays the sole informational role. We believe,
and the evidence supports, the notion that the Web has changed the game and engendered a more
substantial role for disclosure.
Our theory of Web disclosure makes a further contribution in specifying two key dimensions of donor-relevant disclosure. Our rst dimension, nancial disclosure, taps the efciency that prior research has shown to be so important to prospective donors. Our second disclosure-related element,
performance disclosure, is related to effectiveness, which has been the subject of considerable hypothesizing but little empirical verication.
Overall, the results indicate a positive relationship between the level of charitable contributions an
organization receives and the total extent of nancial and performance information disclosed in the
prior period. However, these effects are not across-the-board. Yes, quantity matters, but so does the
type of disclosure. Notably, the effect of nancial disclosure disappears when we disaggregate total
disclosure into discrete measures of nancial, performance, and annual report disclosure. In contrast,
performance disclosure and annual report disclosure have consistently positive associations with
donations.

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The most plausible explanation for the failure of nancial disclosure to be associated with donations is that the organizations nances are more easily summarized in various nancial ratios, which
are often available on third-party websites such as Guidestar or Charity Navigator (Gordon et al.,
2009). The same cannot be said for performance-related information, which does not lend itself well
to cross-organizational comparative numerical ratios. Hence, this is where a nonprot organization
can provide evidence on its own website that would be difcult for a centralized rating agency to replicate; this may explain the relatively strong relationship between charitable contributions and performance and annual report disclosure.
Our study also sheds light on an important conditional relationship: The more dependent an organization is on contributions, the smaller the apparent return from its levels of total disclosure and performance disclosure. Several mechanisms might be behind this seemingly counter-intuitive nding.
For one, highly donor-dependent organizations may have already converted more of their potential
donor pool by other means; with it becoming increasingly difcult to convert each remaining potential donor, such organizations might yield a relatively lower return from disclosure than those that still
have plenty of untapped potential in their donor pool. Alternatively, it could be the case that as dependence on contributions increases, an organization will try to outperform its peer organizations by disclosing more information on the Web, resulting in an intensied disclosure competition. This
intensied race, in turn, triggers a red queen effect (Barnett and Hansen, 1996), with organizations
repeatedly matching each others additional disclosure, ultimately leading to reduced relative donation performance differentials among these organizations. In any case, taken in conjunction with Behn
et al.s (2010) evidence that donor-dependent organizations are more likely to voluntarily disclose
nancial statements, our ndings are consistent with the notion that donor-dependent organizations
are more heavily invested in donor-relevant informationproduction and informationdissemination
activities. In other words, the more donor-dependent the organization, the more it makes available
information in a variety of ways not only via fundraising and disclosure but also, potentially, via
informal practices and word of mouth. As donor-dependent organization all take similar actions, however, additional disclosure may have diminishing returns with respect to charitable contributions in
that actions among rivals cancel each other out. Ultimately, further research is needed to better understand the conditioning effects of donor dependence, the inuence of alternative information sources
such as word of mouth, and more generally, the nature of information in the market for charitable
contributions.
Our study implies that one of the critical decisions nonprot managers face in the market for charitable contributions is how much information they should disclose to the general public regarding
their nancial, strategic, and social performance. It is likely, however, that there is an optimal level
of voluntary disclosure and, if so, then it is in an organizations interest to disclose the right amount
of information. Though a treatment of the optimal level of disclosure was beyond the scope of the
present design, future researchers might consider adopting the tools of optimal control theory (Kamien and Schwartz, 1981) to dynamically model contribution-maximizing levels of Web disclosure.
Finally, the results provide strong support for the value relevance of information disclosed on the
Web. This nding should be of interest to regulators and governing bodies concerned with protecting
the interest of donors. Previous research offers evidence that, in light of donors negative response to
poor fundraising ratios (e.g., Okten and Weisbrod, 2000), nonprot organizations have underreported
fundraising expense (Jones and Roberts, 2006; Keating et al., 2008; Krishnan et al., 2006). In a similar
vein, given donors sensitivity to the types of online disclosures nonprot organizations make, our
ndings raise concerns about the quality of public disclosures. Overall, the ndings suggest that closer
scrutiny of the quality of the disclosures made by nonprot organizations is called for; extensions of
this research should therefore add a focus on the quality, rather than just the quantity, of online
disclosures.

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