Three Essays on Financial Collaboration in the Government and Nonprofit Sectors
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University of Kentucky UKnowledge Theses and Dissertations--Public Policy and Martin School of Public Policy and Administration Administration 2018 THREE ESSAYS ON FINANCIAL COLLABORATION IN THE GOVERNMENT AND NONPROFIT SECTORS Saerim Kim University of Kentucky, [email protected] Author ORCID Identifier: https://orcid.org/0000-0002-8925-2014 Digital Object Identifier: https://doi.org/10.13023/ETD.2018.135 Right click to open a feedback form in a new tab to let us know how this document benefits ou.y Recommended Citation Kim, Saerim, "THREE ESSAYS ON FINANCIAL COLLABORATION IN THE GOVERNMENT AND NONPROFIT SECTORS" (2018). Theses and Dissertations--Public Policy and Administration. 25. https://uknowledge.uky.edu/msppa_etds/25 This Doctoral Dissertation is brought to you for free and open access by the Martin School of Public Policy and Administration at UKnowledge. It has been accepted for inclusion in Theses and Dissertations--Public Policy and Administration by an authorized administrator of UKnowledge. For more information, please contact [email protected]. STUDENT AGREEMENT: I represent that my thesis or dissertation and abstract are my original work. Proper attribution has been given to all outside sources. I understand that I am solely responsible for obtaining any needed copyright permissions. I have obtained needed written permission statement(s) from the owner(s) of each third-party copyrighted matter to be included in my work, allowing electronic distribution (if such use is not permitted by the fair use doctrine) which will be submitted to UKnowledge as Additional File. I hereby grant to The University of Kentucky and its agents the irrevocable, non-exclusive, and royalty-free license to archive and make accessible my work in whole or in part in all forms of media, now or hereafter known. I agree that the document mentioned above may be made available immediately for worldwide access unless an embargo applies. I retain all other ownership rights to the copyright of my work. I also retain the right to use in future works (such as articles or books) all or part of my work. I understand that I am free to register the copyright to my work. REVIEW, APPROVAL AND ACCEPTANCE The document mentioned above has been reviewed and accepted by the student’s advisor, on behalf of the advisory committee, and by the Director of Graduate Studies (DGS), on behalf of the program; we verify that this is the final, approved version of the student’s thesis including all changes required by the advisory committee. The undersigned agree to abide by the statements above. Saerim Kim, Student Dr. Dwight V. Denison, Major Professor Dr. Eugenia F. Toma, Director of Graduate Studies THREE ESSAYS ON FINANCIAL COLLABORATION IN THE GOVERNMENT AND NONPROFIT SECTORS DISSERTATION A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School at the University of Kentucky By Saerim Kim Lexington, Kentucky Co-Directors: Dr. Dwight V. Denison, Professor of Public Policy and Administration and Dr. J.S. Butler, Professor of Public Policy and Administration Lexington, Kentucky 2018 Copyright © Saerim Kim 2018 ABSTRACT OF DISSERTATION THREE ESSAYS ON FINANCIAL COLLABORATION IN THE GOVERNMENT AND NONPROFIT SECTORS The primary objective of this dissertation is to study the management of public and nonprofit resources and financial risk. Governments will be able to use its findings to continue to provide public services in collaboration with other sectors, including the nonprofit sector. Nonprofit financial self-sufficiency and sub-award grant mechanisms between the government and nonprofit sectors are two primary areas to be examined. This dissertation consists of three essays. The first investigates how the diversification of nonprofit revenue portfolios influences extreme revenue risks; the results show that the chance of extreme revenue loss increases when revenue sources are highly correlated to each other. The second essay examines the impact of strenuous state fiscal conditions on nonprofit organizations based in different U.S. states in order to report on generalizable empirical research on sub-award grant mechanisms, state and local government grants awarded to nonprofit organizations. The third essay explores the nonprofit sector’s response to economic shocks, and whether specific state characteristics intensified or mitigated the impact of the economic crisis. The findings from this dissertation can help nonprofit-sector scholars and practitioners understand different perspectives of market risk, revenue risk and portfolio development, and financial stability related to government grants. KEYWORDS: Nonprofit Finance, Nonprofit Risk Management, Inter-organizational Financial Security, Nonprofit Financial Security Saerim Kim April 2, 2018 Date THREE ESSAYS ON FINANCIAL COLLABORATION IN THE GOVERNMENT AND NONPROFIT SECTORS By Saerim Kim Dwight V. Denison, Ph. D. Co-Director of Dissertation J. S. Butler, Ph. D. Co-Director of Dissertation Eugenia F. Toma, Ph. D. Director of Graduate Studies April 2, 2018 Date DEDICATION My family members, Jang Tae Kim, Yeonhee Kim, and Youngbin Kim, have been my greatest source of inspiration and support throughout the course of my dissertation. Therefore, this dissertation is a testament to their encouragement and sacrifices. ACKNOWLEDGEMENTS This dissertation would not have been possible without the support of my academic mentors, family, and friends. I am especially indebted to Dr. Dwight V. Denison, my committee chairman, and Dr. J.S. Butler, my co-committee chairman, who have been supportive of my career goals and worked actively to provide me with a tremendous amount of constructive feedback on my research. Special thanks also go to Dr. Edward Jennings and Dr. Merl Hackbart for allowing me to be part of various research projects that have greatly furthered my academic achievement. Without my committee members’ insightful comments and encouragement, this dissertation would not have been completed to such a high standard. In addition, I would like to express my gratitude to Dr. Eugenia Toma and Dr. Nicolai Petrovsky for their dedication to quality education, which helped build my solid academic foundation. In addition to my committee’s professional support, my family also made it possible for me to complete this dissertation. I would like to thank the ultimate roles models, my parents, Jang Tae Kim and Yeonhee Kim, who have shown me the value of hard work and whose love and guidance are with me in whatever I pursue. Also, words are not enough to express my gratitude to my brother, Youngbin Kim, for his remarkable support as well as inspiration. Additionally, I wish to give thanks to my best friend, Paul Beresuita, and his family for their unconditional encouragement and prayers over the years. Lastly, I want to acknowledge my supportive colleagues at the Martin School, whom I regard as lifelong friends, teachers, and family. A special thanks to Alex Combs, iii Seungjin Choi, Whitney Davis, Zihe Lauren Guo, Yunjin Jung, Jeeyen Koo, Nate Kratzer, Hyokyung Kwak, Jueyoung Mok, Kyungha Oh, Cole Rakow, Andrew Sullivan, Wenchi Wei, Jinhai Yu, and Changkeun Yun. Without them, I would not have been able to enjoy this process. iv TABLE OF CONTENTS Acknowledgements ........................................................................................................... III List of Tables ................................................................................................................... VII List of Figures ................................................................................................................ VIII Executive Summary ............................................................................................................ 1 Chapter One. Introduction To Nonprofit Finance And Revenues ...................................... 3 Nonprofit Finance And Revenue Sources....................................................................... 4 Dissertation Chapters ...................................................................................................... 6 Chapter Two. Nonprofit Revenue Strategy And Downside Risk: Applying Portfolio Theory And Extreme Value Theory ................................................................................... 8 Theoretical Background ................................................................................................ 10 Extreme Value Theory (Evt) ..................................................................................... 10 Revenue Risk: Deviation Risk And Downside Risk................................................. 11 Nonprofit Revenue Strategy: Revenue Equalization And Portfolio Diversification 16 Hypotheses And Variable Specification ....................................................................... 20 Model Specification And Data...................................................................................... 26 Descriptive Findings ..................................................................................................... 31 Estimation Results ........................................................................................................ 33 Discussion ..................................................................................................................... 40 Conclusion .................................................................................................................... 41 Chapter Three. 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