17/03/2010 n.72 - Do Social Enterprises Finance Their Investments Differently from For-proft Firms?

di Alessandro Fedele e Raffaaele Miniaci, Università di Brescia

Abstract
Using a longitudinal data set of balance sheets of 504 non profit and for-profit firms operating in the social residential sector in Italy, we investigate the relationship between capital structure and type of enterprise. The nondistribution constraint  typical of nonprofit organizations increases the fraction of own capital on total  investment: this is shown, by means of a theoretical moral hazard model, to reduce  their leverage. By contrast, the intrinsecally high commitment of nonprofit  entrepreneurs weakens the moral hazard problem: this augments leverage (ii). Our  empirical analysis shows that once control for observable characteristics for-profitt  companies have a leverage 6% higher than nonprofit enterprises, even if the latter  faces lower credit costs. We explain this finding by arguing that effect  prevails on effect.

Keywords: for-profit and nonprofit enterprises; capital structure
JEL Codes: A13, D21, D82, G32

Scarica l'allegato: wp72.pdf