ON THE CAPITAL STRUCTURE OF NON-PROFIT ORGANISATIONS: AN EMPIRICAL STUDY FOR CALIFORNIAN ORGANISATIONS.

The article investigates the common determinants of the capital structure of non-profit organizations (NPO). It discusses the theory of NPO capital structure in terms of equity, debt, debt financing and potential agency problems. The authors examined the factors that influence the borrowing decision of Californian NPOs. They found that labor-intensive NPOs are more inclined to debt financing and equity constrained NPOs borrow less often. The authors focussed on the determinants of financial leverage, the share of debt relative to total assets. The authors conclude that the capital structure theory explains the NPO's capital structure choices and highlights the prominence given to equity constraint considerations and agency related explanations.