Abstract
This doctoral thesis contains three research papers in social finance, a field concerned with the financing issues of organizations aiming to solve social problems. Intertemporal Preferences of Nonprofit Organizations This paper studies the intertemporal preferences that govern the spending decision of nonprofit organizations. I estimate the subjective discount rate and the elasticity of intertemporal substitution based on an extension of the consumption Euler model that allows for heterogeneous parameter estimates with regards to donation dependency and size. Biting the Hand That Feeds You: Effects of Embezzlement in Nonprofits This paper studies how newspaper reports on embezzlement affect donations received by nonprofit organizations. Based on a unique data set on wrongdoings by top managers in nonprofits between 1995 and 2002, I provide evidence that the cost of weak governance in nonprofits is very high. What is the Business of Business? This paper develops a theoretical framework for understanding the emergence of new organizational forms, such as socially responsible firms and social enterprises, which embody the private sector’s efforts to resolve problems that typically have been within the purview of government and traditional charities. The framework yields an optimal investment policy, which typically Pareto-dominates many common social investment principles, such as break-even conditions, social screening and SROI.