Can We Determine Debt To Equity Levels In Non-Profit Organisations? Answer Based On Polish Case

  • Grzegorz Michalski Wroclaw University of Economics
  • Guenter Blendinger Faculty of Economics, Technical University of Kosice TUKE , Slovakia Lecturer at University of Applied Sciences Heilbronn, Germany
  • Zoltan Rozsa Department of Management, School of Economics of Public Administration Management in Bratislava, 851 04 Bratislava, Furdekova 16, Slovakia.
  • Anna Cierniak-Emerych Department of Labor and Capital, Faculty of Engineering and Economics, Wroclaw University of Economics, 53345 Wroclaw, Komandorska 118, Poland
  • Maria Svidronova Ekonomická fakulta Univerzita Mateja Bela, Tajovského 10, Banská Bystrica, Slovakia
  • Jan Buleca TUKE – Technical University of Kosice, Nemcovej 32, Kosice, Slovakia.
  • Hemantkumar Bulsara
Keywords: equity, debt capital, nonprofit organisations, efficiency of NGO

Abstract

Capital structure is an indicator that testifies about the level of financial risk. Nonprofit organisations are an essential part of general social policy in the Polish economy. They realise important aims in healthcare, education and many other socially important areas. Considering efficiency of nonprofit entities should be remembered that from the donor perspective, is important the way the managing team uses resources of the nonprofit organisation and if it is used most effectively. The nonprofit organisation efficiency should be considered in the context of the risk. The one from the most important way to be out of business is the debt to equity relation. In paper are considered relations between debt and efficiency. That relation is also illustrated for Polish nonprofit entities data. Proposal of the paper includes model, which helps to find the optimal level of debt for Polish nonprofit organisations conditions. Novelty of that model is based on full costs of debt financing nonprofit entities in the context of donors expectations, which in Polish social and economic environment means that costs that are not directly linked with realisation of main aim of the social entity, cannot be higher hat 10% of collected money sources.

DOI: http://dx.doi.org/10.5755/j01.ee.29.5.19666

Author Biographies

Grzegorz Michalski, Wroclaw University of Economics
Grzegorz Marek Michalski is an economist, researcher at the School of Management, Computer Science and Finance at Wrocław University of Economics. His main area of research are Business Finance and Financial Liquidity Management. Grzegorz Marek Michalski is a professor of finance. Much of his research is aimed at understanding the determinants and dynamics of financial corporate liquidity. In his research, he has examined the firm value and cost of capital results of corporate liquidity management policies and resultts of demand for liquidity by firms. He has also investigated the effects of corporate liquidity on portfolio choice and corporate current assets decisions. Currently, Grzegorz Marek Michalski is studying the liquidity decisions made by nonprofit organizations. Grzegorz Marek Michalski also studies current business investment in accounts payable, inventories and operating cash. Recent grants and projects examine the effect of liquidity constraints on nonprofit organizations and for-profit small enterprises decisions to level of current assets investments, and on whether or not to use such information on cost of capital level and results on business valuation results. In ongoing work, he studies the unique risk characteristics of business organization capital, and documents the high expected returns which enterprises heavily invested in organization capital earn.
Guenter Blendinger, Faculty of Economics, Technical University of Kosice TUKE , Slovakia Lecturer at University of Applied Sciences Heilbronn, Germany
Guenter Blendinger graduated with both a technical and a business degree. For his technical degree thesis he was granted a patent and awarded a price.During his now 20+ years of professional experience in sales and marketing with Hewlett-Packard and now its software spin-off Micro Focuswith the majority as a business and people manager, he has great practical experience in finance and economics from a business managementpoint of view. That led him to do a PhD program with TUKE in the field of finance covering corporate liquidity aspects as well as financial aspectsand measures of creating value for corporations embedded in corporate governance guidelines.He also is a lecturer at the University of applied sciences Heilbronn, Germany, covering international sales in his lecturesa and seminars.
Zoltan Rozsa, Department of Management, School of Economics of Public Administration Management in Bratislava, 851 04 Bratislava, Furdekova 16, Slovakia.
Department of Management, School of Economics of Public Administration Management in Bratislava, 851 04 Bratislava, Furdekova 16, Slovakia.
Published
2018-12-11
Section
Articles