Are More Stakeholder-Oriented Firms Less Indebted?

Nonprofit firms are multi-stakeholder organizations, where members, non-member workers, clients or their families, volunteers, public institutions, funders and other internal or external stakeholders have formal and/or informal power to affect nonprofit firms’ strategies. This paper investigates the role played by stakeholder orientation in shaping capital structure of nonprofit firms. We develop a theoretical framework and show that the relation between stakeholder orientation and nonprofits' leverage can be either positive or U-shaped. We empirically test our predictions by focusing social coops in the Italian social care sector and find a negative relation between stakeholder orientation (proxied by the ratio voluntary workers/total workforce) and leverage. In particular, relying on a conditional quantile regression analysis, we find that an increase in a percentage point of the ratio voluntary workers/total workforce shifts the first conditional decile of the leverage by -0.7%, the median by about -0.3% and the ninth decile by -0.15%