Funding the present and the future: Drivers of NPO's financial sustainability

Abstract

AbstractDespite the prominence of financial sustainability as a critical aspect of nonprofit organizations' self‐sustainability being widely recognized, the literature on the drivers of nonprofit financial sustainability is quite limited, particularly for quantitative empirical studies. To address the research gap, we first quantify nonprofit financial sustainability in a real sense, with financial indicators measured by the nexus of long‐term and short‐term, and then systematically examine to what extent the nature, nurture and environmental drivers help to explain financial sustainability. To be specific, by using national data compiled from the Research Infrastructure of Chinese Foundation during 2014 to 2016 and using Random Effect Logit Model, this study finds that foundations registered at the provincial level, being private ones, possessing larger size of total assets with diversified revenue sources, spending more on administration, and located in the more affluent areas are more likely to shape short‐term resilience to the unexpected economic shocks and meanwhile achieve long‐term success in maintaining or expanding services. This study contributes to a better understanding of nonprofit organizations' financial performance, which is beneficial for practitioners to adopt appropriate managerial practices and organizational strategies.