Understanding Information Disclosure of Nonprofits in China

The existing literature on nonprofit transparency deals mostly with nonprofit organizations in developed countries. We have addressed this gap by applying resource-dependence models to examine the transparency of philanthropic... [ view full abstract ]

The existing literature on nonprofit transparency deals mostly with nonprofit organizations in developed countries. We have addressed this gap by applying resource-dependence models to examine the transparency of philanthropic foundations in a non-Western setting. By using a panel data set, we examine the political and institutional factors shaping the transparency of Chinese philanthropic foundations in a dynamic setting, contributing to the advancement of scholarly knowledge on public governance in authoritarian and transitioning countries. Specifically, we use the resource dependence theory (RDT) as the theoretical lens to investigate the antecedents of foundations’ information disclosure substantiveness. The resource dependence theory that focuses on external control of firms is one of the key perspectives in explaining how stakeholders affect organizational outcome, arguing that strong relational networks facilitate organizational conformity to institutional pressures. In the nonprofit sector, strategies such as revenue diversification and marketization could be adopted by nonprofit organizations to alleviate or overcome their resource dependence on a specific group of stakeholders. In this study, we focus on how foundations’ external resource dependence explains their information disclosure, which is considered as a strategic action to maintain and improve organizational legitimacy in the eyes of external constituents. Specifically, we explore foundation-level variations in information disclosure substantiveness by first highlighting three forms of resource dependency: dependence on the government (power dependence) and dependence on donors (donation dependence). We then combine RDT and contingency theory to see how environmental contingencies affect the strength of firms’ dependency on external stakeholders.
We collected data from the audited annual reports of Chinese charitable foundations from 2010 to 2013, which are our most updated data on hand. As required by the Chinese government since 2004, charitable foundations in China need to publish their financial data and basic background information in their audited annual reports, which cover all the required information as explanatory variables. Data on these charitable foundations over the years were mainly compiled from the China Foundation Center (CFC), in addition to the official websites of China’s Ministry of Civil Affairs, major provincial civil affairs bureaus, and individual foundations. Hierarchical multiple regression analysis is used to test for the relationships that we hypothesized. Our findings suggest a positive relationship between the degree of service diversification and a foundation’s information disclosure substantiveness. Foundations that have higher degree of government embeddedness were less likely to engage in more substantive information disclosure. We further found that the strength of these relationships vary among local jurisdictions with different degree of government transparency and marketization. Interestingly, public foundations were more likely to engage in more substantive information disclosure only in jurisdictions with high level of competition from local NPOs.