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The authors examine whether limitations in Form 990 result in zero or understated fundraising and administrative expenses for organizations supported by related organizations. Form 990 does not consolidate financial information of legally separate related organizations, resulting in fundraising and administrative expenses being reported by supporting organizations but not by the supported organization.

The authors use the IRS Statistics of Income Sample Data Files and compare charities receiving support from related organizations (supported) to non-supported charities.

The authors find evidence that supported organizations are likely to report zero or understated fundraising expenses and zero administrative expenses. Those receiving related donations are more likely to have zero or understated fundraising expense while those receiving related compensation are more likely to have zero and understated fundraising and administrative expenses. The authors also find evidence that supported organizations receiving greater amounts of related donations and related compensation are also more likely to report zero and understated fundraising expenses as well as zero administrative expenses while greater amounts of related compensation are also associated with understated administrative expense.

Since donors and other stakeholders use Form 990 to evaluate nonprofits, its unconsolidated nature could result in a lack of comparability across organizations and misinformed resource allocation (e.g. donation) decisions. The results also have implications for researchers who use zero and understated fundraising and administrative expenses as proxies for low quality reporting or interpret them as data errors.

The paper examines the extent to which zero or understated fundraising expense reporting (i.e. the fundraising expense puzzle) is associated with supported organizations receiving financial support from related organizations. The authors also expand their examination to zero and understated administrative expenses.

This study aims to provide a timely “first look” at the impact of COVID-19 lockdown restrictions on the financial distress of nonprofits.

This study uses Internal Revenue Service Form 990 returns, US census information, and Oxford COVID-19 workplace restriction data and utilizes logistic regression to analyze results.

Nonprofits with greater COVID-19 lockdown restrictions are more likely to experience financial distress, whether measured by a 30% reduction in total, program, management and general, or fundraising expenses. This paper also examines results by subsector using National Taxonomy of Exempt Entities data and finds that the Human Services and Public and Society subsectors drive the full sample results when the authors use total, program, or managerial and general expenses in the measure of financial distress, and the Education and Environment and Animals subsectors drive the results when using fundraising expenses in the measure of financial distress.

Broadly speaking, this paper contributes to the limited research stream examining the impact of crises on nonprofits. More specifically, this study is among the earliest to rely on quantitative data to investigate such effects.

The purpose of this study is to examine the association between employment status and financial resilience during the COVID-19 pandemic.

This study employed US nationally representative data. A financial resilience index was created based on households' ability to pay for basic living expenses and the resources used to meet such needs. Employment status was categorized into seven groups based on whether the respondent worked for pay in the last seven days, experience of income shock since the start of the pandemic for workers' household and reasons for not working for non-workers' household. A generalized linear model (GLM) model was used to examine the relationship between respondent employment status and household financial resilience. An ordinary least square (OLS) logistic regression with no proportional odds assumption was employed to investigate the association between the respondent's employment status and household ability to pay for basic living expenses. A logistic regression was utilized to explore the relationship between respondent employment status and resources used by the household to pay for basic living expenses.

The top three least financially resilient households include those in which the respondent's work was affected by the pandemic, the respondent did not work due to being sick with COVID or caring for someone with COVID and the respondent did not work due to fear of COVID.

Future research should distinguish the reasons for not working when examining the association between unemployment and household financial resilience as well as their overall financial wellbeing. Cross-sectional data cannot establish a causal relationship. Findings using US data may not be generalized to other countries.

Workers with health and employment risks and financial professionals working with these clients should consider these risks when building household financial safety net. Policymakers should develop measures to allow normal business operations while effectively contain the spread of the COVID-19 virus.

This study created a financial resilience index that considers various household situations, allows both internal and external resources to be utilized to cover basic living expenses and reflects the diverse nature of financial resilience. This study is the first to look into voluntary and involuntary labor force separation for COVID-19 and non-COVID-19 related reasons.

The study aims at examining the relationship between the forms of misclassification practices, namely expense shifting and revenue shifting. In particular, the study aims at identifying the form of shifting that has been preferred by firms to meet the industry average profitability.

Core earnings and operating revenue expectation models are used to measure expense shifting and revenue shifting, respectively. The panel fixed-effects models are used to control for unobserved heterogeneity across industries and time.

Based on a sample of Bombay Stock Exchange-listed firms, the author finds that firms prefer expense shifting over revenue shifting to meet industry average profitability, implying that firms choose the shifting tool based on the relative advantage. Further, the findings deduced from the empirical results demonstrate that firm life cycle and mandatory adoption of International Financial Reporting Standards (IFRS) moderates the relationship between shifting forms and industry average profitability. However, the negative impact of IFRS on shifting practices is found to be less pronounced among BigN audit firms.

The study is among the pioneering attempt to document the substitution relationship between shifting forms. It is the first study that examines a form of classification shifting, where gross profit and core earnings both change as an effect of misclassification.

Within the context of the nonprofit resiliency framework, the authors use nonprofit functional expenses and contribution revenue to explore how the COVID-19 pandemic affected the ability of nonprofits in different subsectors to carry out their mission, as well as their ability to “pivot” fundraising strategies to integrate social media and digital engagement.

The authors use IRS form 990 return data for organizations with a year-end return that includes at least six months of COVID-19 impact (“Wave 1 Effects” period) and also have a prior-year return (“Business as Usual” period). The authors use Wilcoxon signed rank tests to examine whether there are differences in our variables of interest between the two periods.

While the majority of nonprofits in most subsectors experienced a significant decrease in program spending, fundraising spending and fundraising efficiency ratios between the two time periods, the authors found variation in the change in contribution revenue and fundraising ratio between the two periods between subsectors. The authors also find that the percentage of nonprofits able to “pivot” their fundraising strategies varies by subsector between 13.33 and 31.23%.

This paper provides new information regarding the pandemic's initial effect on nonprofit program and fundraising spending, the related contribution revenue and the ability of nonprofits to “pivot” fundraising to remote strategies. The authors propose a more robust fundraising efficiency measure and a new measure indicating a nonprofit's “ability to pivot” their fundraising strategy. The authors encourage future researchers to conduct further longitudinal studies to understand how these effects may continue or change.

This paper aims to present a study on the effect of income and expense shifting on the corporate income tax evasion – an example of intentional noncompliance practiced by tax agents. The authors expected that the tool used would differentiate the extent of understatement of tax liability.

Two experiments were conducted in which young (N = 62) and experienced (N = 68) tax agents read a scenario placing them in a position of an employee responsible for tax planning and calculations of tax liabilities. The respondents’ task was to decide about the extent of the tax liability understatement using income or expense shifting.

Research demonstrated significantly higher extent of corporate income tax understatement when using income shifting compared to expense shifting in case of experienced tax agents (Study 2) and on tendency level among young tax agents (Study 1).

Results of the studies might be of interest to managers paying attention to tax procedures within the company, governmental agencies investigating corporate tax evasion, as well as educators responsible for tax agents’ initial training and lifelong learning.

This study concentrates on tax agents who are employed in companies and corporate income tax evasion, which has not been analyzed in the literature so far.

The study aims to investigates which form of classification shifting is preferred by firms to avoid the violation of debt covenants and whether the higher-audit quality constraints the shifting practices of firms incentivized to avoid covenant violations or not.

A sample of 1,644 Bombay Stock Exchange (BSE)-listed firms during the period 2009–2021 has been used in this study and tested through panel data regression models. Two forms of classification shifting, namely expense shifting and revenue shifting have been taken into account. The findings are validated through the propensity-score matching technique.

The findings deduced from the empirical evidence demonstrate that firms prefer revenue shifting over expense shifting to avoid covenant violations, consistent with the notion of the ease-need-advantage-based shifting framework, where firms are found to prefer a shifting tool with greater relative advantage. Further, the author finds that superior audit quality has a constraining effect on expense shifting, but not on revenue shifting, indicating the partial effectiveness of high-quality auditors in curbing the corporate misfeasance of classification shifting. These results are robust to the problem of endogeneity and self-selection bias.

The paper provides new evidence on debt market incentives behind classification shifting, where firms are found to substitute classification shifting forms to avoid covenant violations. Further, the study is among pioneering attempts to investigate the impact of audit quality on revenue shifting and document the non-constraining effect.

The purpose of this paper is to be the first empirical article to provide necessary standard deviation inputs for adoption in probabilistic prognostications of hotel revenues and expenses, i.e. prognostications that consider risk. Commonly accepted methodologies to develop hotel financial projections resulting in point estimates of upcoming performance have been perceived as egregiously insufficient because they do not consider risk in lodging investments. Previous research has recommended the use of probabilistic methodologies to address this concern, and it has been recommended that analysts use Monte Carlo simulation. This methodology requires the estimation of standard deviations of specific, future hotel revenue and expense items, and this paper provides such inputs based on a large sample of actual, recent data.

This study provides actual standard deviations using a sample of recent hotel profit and loss (P&L) statements for over 3,000 hotels (Over 19,000 P&L statements) to provide analysts with empirically-supported standard deviations that may be applied to Uniform System of Accounts for the Lodging Industry (USALI) hotel revenues and expenses in hotel financial (revenue and expense) prognostications.

Findings are presented for standard deviations based on typical line items as defined in the USALI, and these findings may be used by practitioners as inputs for hotel financial projections. Findings also include that hotel revenue items generally have higher standard deviations than expense items. Findings are presented in detail in the manuscript, including overall findings, as well as findings based on hotel class.

Rather than practitioners adopting standard deviations of hotel revenue and expense line items based on guesswork or judgment, which is the current “state of the art” in hotel financial projections, this paper provides practitioners with actual standard deviations which may be adopted in probabilistic prognostications of hotel revenues and expenses.

This paper may be the first to provide practitioners with actual standard deviations, based on typical USALI line items, for adoption in probabilistic prognostications of hotel revenues and expenses.

Prior research shows that religiosity affects the degree of managers' risk aversion. As a result, religious firms are less likely to invest in R&D activities. Moreover, US GAAP treats these investments as expenses. For this reason, religious firms have fewer expenses in their earnings and are less likely to be in financial distress.

Data are collected from Worldscope and the Churches and Church Membership files of the American Religion Data Archive website from 1985 to 2018. With 18,199 observations in US context, the authors used the marginal effect to test the mediating effect of R&D accounting treatment.

The authors find that the marginal effect of religiosity on financial distress with US GAAP is higher than the marginal effect of religiosity on financial distress with capitalization of R&D costs, which means that accounting treatment can explain the relation between religiosity and financial distress in the US context.

The authors used linear interpolation and linear extrapolation data to be able to conduct this research over a period of 1985–2018. For future researches, the authors propose to test other factors which can explain the relationship between religiosity and financial distress based on the ethics element.

These results should be of interest to regulators because treating R&D activities as expenses can destroy the accounting performance of firms that prefer investing in risky projects. This favoritism prevents the comparison between two firms in the same industry with different risk-taking behaviors. This problem is more prevalent if the authors have two firms with different ratios of religiosity. This paper suffers from a major limitation related to data availability.

This may be the first study that investigates why religious firms are less likely to be in financial distress. This paper notes that religious firms are less likely to be in financial distress because their conservative behavior towards R&D activities coincides with the conservative R&D accounting treatment. In fact, the mismatch between expenses and revenues from R&D activities can cause financial distress.

To report inflated operating performance indicators, such as operating revenue and operating profit, managers vertically reposition revenue and expense items inside the income statement. This study aims to investigate the relationship between credit market incentives and these practices.

This study examined a sample of 1,592 Bombay Stock Exchange-listed companies from 2009 to 2021 and tested them using panel data regression models. The propensity score matching method and different measurements of classification shifting practices are used to validate the results.

The conclusions drawn from the empirical data show that firms prefer revenue shifting over expense shifting to prevent debt covenant violations. It shows that the firm’s classification-shifting practices are driven by credit market incentives. This finding is consistent with the notion of positive accounting theory that firms engage in classification shifting (earnings management) to avoid violation of debt covenants. Further, the firm’s preference for revenue shifting is in line with the ease-need-advantage-based shifting framework where firms choose the shifting tool based on costs and constraints associated with each tool.

The finding suggests that if managers heavily rely on revenue shifting to avoid debt covenant violations, the firm may end up breaking these covenants based on its actual operating performance. Managers may use aggressive accounting techniques to prevent covenant violations, which can be a warning indicator of financial difficulties or operational problems. It highlights the necessity for creditors and investors to carefully evaluate a company’s financial stability outside of the financial statements that are publicly disclosed. Authorities should create separate forensic accounting standards for auditors to check revenue items and stop the corporate misfeasance of revenue shifting.

The study is among the earlier attempts to provide empirical evidence on credit market incentives behind classification shifting practices. It is the first study that documents the substitution relationship between classification shifting forms for avoiding violation of debt covenants.