Does it pay to pray? Religious nonprofits and funding

Abstract

This study examines whether religious identity has an impact on two types of funding, donations and government grants, received by nonprofit organizations. We argue that religious nonprofits attract more donations because (1) donors feel an affinity or special tie to religious organizations and/or (2) donors regard religious organization as having good stewardship. Using 54,917 organization-year observations we find that 18% of the largest U.S. nonprofit organizations have some religious identity and that these organizations receive more donations than their non-religious counterparts. We further find that the association is more pronounced for nonprofits in more religious geographic areas, those with unrestricted donations, and organizations with better stewardship. Conversely, we find that government grants are negatively associated with religious identity, a result consistent with the separation between church and state established under U.S. law and tradition. This negative relationship, however, is mitigated for nonprofits with better stewardship. Our results should be of interest to donors and policymakers who seek to understand the impact of religion on nonprofit funding as well as the role of donor affiliation and stewardship in the fundraising process.