Social Capital

Social capital is critical to the entities' disciplinary environment and the ability to produce high quality financial reports. Although prior literature on for-profit setting indicates that social capital impacts both governance (Ferris, et al., 2017) and financial reporting quality (Jha & Chen, 2015; Jha, 2019), this area has received less attention in non-profit literature. The purpose of this dissertation is to examine the impact of the social capital of a non-profit organization's (NPO) headquarter area (also known as community social capital) on the NPO governance and disclosure quality (i.e., the quality of Form 990).
The study hypothesizes and finds that the community social capital of an NPO headquarter area has a positive impact on its governance. The positive relationship suggests that NPO social capital and governance play a complementary role, where managers in high social capital face strong disciplinary environment and enjoy strong social connections and professional reputations and thus have fewer incentives to resist the adoption of sound governance practices. Similarly, the study also hypothesizes and finds that the community social capital of an NPO headquarter area has a positive impact on its disclosure quality. This finding suggests that community social capital disciplines NPO self-interested managers' behavior to manipulate financial numbers in Form 990 disclosures.

The trauma and devastation that resulted from Hurricane Katrina's landfall on August 29, 2005, produced a wide spread public perception of government neglect and ineptitude. Subsequently, a period of nationwide shame and concern for those most affected by the disaster elicited a wave of financial generosity from all social sectors. Yet, by late 2005 the media declared that the majority of Americans had become desensitized to the tragedy and its consequences, coining this shift in public perception as "Katrina fatigue." Thousands of volunteers contradicted this phenomenon, however, by performing service in the devastated city of New Orleans. Long-term volunteers defied "Katrina fatigue" by redirecting the trajectory of their lives so they could provide service. Conventionally accepted volunteer theory predicts that volunteers provide service and that their labor operates in conjunction with institutionally supported mechanisms of security and services.