Effects of Financial Efficiency and Choice to Restrict Contributions on Individual Donations

This study examines whether and how a nonprofit organization's financial efficiency and its solicitation type-namely, whether it allows donors the ability to restrict contributions to their preferred choices-influence individual donations. We find that a nonprofit organization's financial efficiency indirectly influences individual donations through its effect on donors' confidence. We also find that a nonprofit organization receives significantly more donations when it allows donors to restrict donations to their preferred choices than when it does not. This positive effect is greater when the organization reports low efficiency than when it reports high efficiency. Thus, allowing the restriction of donations not only influences individual donations directly, but also compensates for the effect of low efficiency on donations. [PUBLICATION ABSTRACT]