Date of Conferral
Public Policy and Administration
Although private foundations are assumed to be beneficial, their impact on grantee organizations is not well understood. This quantitative research explored how private, nonoperating foundations influence grantees' financial capacity to pursue their missions. Principal-agent theory was applied to rationalize foundations' social good purpose, along with subsidy theory of public charities' need for capital accumulation, thus comprising a unique framework for identifying pathways of relationships amongst influencer variables of foundations' operating characteristics; the outcome of grantees' months of unrestricted, liquid net assets (MULNA); and the mediator of foundations' payout rate. Multiple regression and indirect effects analyses of data on 612 cases from NCCS and tax returns revealed that the sector focus and characteristics of certain types of funders (i.e., oldest, largest, smallest, volunteer and professionally staffed, aggressive and average charitable spenders, and arts-focused foundations) affected payout behavior. In addition, large foundations' payout rate influenced MULNA, especially among financially strong grantees. Finally, payout mediated the association between age and MULNA among the largest foundations, and between sector focus and MULNA among the oldest foundations. This research contributes to the discourse on foundations' effectiveness in three ways: (a) associations were significant among segmented data, thus affirming the usefulness of examining specific types of foundations; (b) wealth distribution by the largest and oldest foundations was of tangible importance to their grantees, knowledge of which can be used in grant decision making and in informing policies on payout; and (c) principal-agent theory can be applied to hold foundations accountable to public interests.