Qun Wang, Indiana University Bloomington
Lijun He, Pace University
Since the 2004 Regulations of Administration of Foundations, there has been no research on Chinese foundations’ financial health. Considering the importance of foundations in the civil society, this is a needed task. The present paper conducts an empirical evaluation of their financial health using 2,763 foundations with 10,102 observations. The adapted Tuckman and Chang (1991) model, which measures adequacy of equity, revenue diversification, administrative cost ratio and operating margin, reveals that two thirds of the foundations are not financially healthy. From 2008 to 2013, foundations’ overall financial health has improved only to a limited extent. Public foundations outperform private foundations, but not on all measures. A group of recent foundations show that in a short run, foundations may improve on some measures but in general their financial health deteriorates. This may indicate a nonlinear learning curve for foundations to be financially better-off. Organizational variables are largely correlated with the four measures; revenue diversification and administrative cost ratio are more likely to correlate with financial variables. This research contributes to theoretical hypothesizing and practical foundation financial health benchmarking.