Mandatory Financial Statements Disclosure and Nonprofits’ Debt Structure: An Empirical Analysis

At the time of introducing legally required disclosure of financial statements (FS) among Belgian nonprofit organizations (NPOs) in 2006, NPOs are found to increase their share of long-term and financial credit in total credit, relative to a control group of for-profits with unchanged disclosure requirements. Regarding FS format, NPOs filing the complete, audited FS format were able to increase their share of long-term and financial credit in the post-disclosure period, relative to a control group of NPOs filing the abbreviated, unaudited format. Rather than impacting total credit financing, expanded FS disclosure regulation seems to cause a shift in debt structure toward greater long-term and financial credit. This may increase NPOs’ financial stability and may alleviate their financing constraints. The results support the relevance of FS disclosure in the nonprofit sector.