Tangible Information and Charitable Giving: When (Does) Nonprofit Overhead Matter?

Abstract

Nonprofit organizations in the U.S. have been under pressure to demonstrate their “worthiness” by minimizing overhead costs. Prior experiment studies find that donors respond negatively to high overhead costs when overhead information is highlighted. In reality, donors receive all sorts of information about nonprofit organizations from various channels. While high overhead has been found to reduce donors’ perceived impact and charitable giving, providing other types of tangible information can increase giving by enhancing donors’ perceived impact. When other types of information are available, to what degree overhead aversion still exists? We use two online survey experiments to examine how information on overhead costs and donation use affect giving intentions to a hypothetical charity in a single-organization and two-organization evaluation setting. Only a small proportion of people demonstrated overhead aversion when presented with a single organization. There was stronger evidence of overhead aversion when participants were asked to compare and choose between two organizations. Providing tangible information about what donations can buy mitigated overhead aversion among male donors. This study contributes to the growing experimental research on the relationship between overhead ratios and charitable giving, and provides practical insights for nonprofits hoping to ameliorate overhead aversion and increase donations.