[Chinese Public Administration Review] Are the Wealthy Also Healthy? An Empirical Evaluation of the Financial Health of Chinese Foundations

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Qun Wang, Lijun He

Abstract

Since the 2004 Regulations of Administration of Foundations, there has been limited research on Chinese foundations’ financial health. Considering the importance of foundations in the nonprofit sector, this is a needed task. The present paper conducts an empirical evaluation of their financial health using 2,763 foundations with 10,102 observations. Tuckman and Chang (1991), which measures adequacy of equity, revenue diversification, administrative cost ratio and operating margin, reveals that 1) two thirds of the Chinese foundations are financially unhealthy; 2) 2008 to 2013, foundations’ overall financial health saw moderate improvement. Public foundations outperformed private foundations; and 3) new foundations may improve their health at a faster pace than older foundations. However, the financial health scores prove that we should interpret the results conservatively, because the quality of their health improvement is between low to moderate. The decreased number of unhealthy foundations does not mean foundations improved on all measures. Public foundations did not perform better on all measures than private foundations. In the six-year period, recent foundations became better on three measures, while worse on the other measure.

Keywords

Nonprofit Finance; Chinese Foundations; Nonprofit Management

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