Abstract Creating revenue diversification forces nonprofit leaders to create innovative programs and services, build resilience against adverse conditions, and establish a sustainable future. The purpose of this single-case study was to explore revenue diversification strategies used by 3 leaders of a nonprofit organization in western California of the United States using Markowitz\u27s modern portfolio theory as the conceptual lens. To start, a nonprofit must determine . This paper is a contribution to the ongoing debate on the benefits and drawbacks of bank revenue diversification. PMAP Publications. a merger, or acquisition of another company. Those who control the resources hold the power. The purpose of this single-case study was to explore the revenue . In recent decades, revenue diversification has become a prevalent practice in state and local government finance. .
. 2.1 Agency Theory The Berle and Means, (1932) and Smith, (1776) emphasized the separation mechanisms of proprietorship and control. Bank revenue diversification has become important for research of bank performance due to the increased use of this strategy in recent years. The model estimation using the GMM system reveals that diversification, when taken as a whole, improves bank . by Howard Chernick and Andrew Reschovsky. The concept of revenue diversification and financial portfolio theory have received increased academic attention in the non-profit sector during the last two decades with Chabotar , Chang and Tuckman , and Kingma  making significant contributions amongst others.The main idea of this theory is that organizations try to diversify their income portfolios to be less susceptible to financial . Empirical evidence presented in this paper may help to explain the extent to which countries are able to engage in this form of rent seeking. How does revenue diversification shape the budgetary solvency of city governments? - Increased focus on customer experience. REVENUE DIVERSIFICATION By JOHN A. C. CONYBEARE 1. Horizontal Diversification.
In recent decades, revenue diversification has become a prevalent practice in state and local government finance. The trend of revenue diversification, according to the portfolio theory, has far-reaching implication for public financial management as it may change revenue stability, which has been an important policy objective for state and local government administrators. Financial stringency has been an increasing concern in the higher education sector, especially in the aftermath of the financial crisis. So Slow to Change: The Limited Growth of Nontax Revenues in Public Education Finance, 1991-2010. by Thomas Downes.
It then tests a model of revenue diversification's impact on tax effort using data from 1993 to 1997, and separated by home rule and non-home rule municipalities.
It is a meta-analysis of previous studies that have studied the relationship. Main Menu; Earn Free Access; Upload Documents; Refer Your Friends; Earn Money; Become a Tutor; Scholarships; Retaining existing customers will always be more cost effective than acquiring new customers, which makes it an obvious revenue growth strategy. Shifting marketing emphasis from customer acquisition to retention. Analyzing a panel dataset of 200 commercial banks from all South Asian . Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. Jimenez, Benedict and Afonso, Whitney, "Revisiting the theory of revenue diversification: Insights from an empirical analysis of municipal budgetary solvency" (2022). increasing revenue diversification in the . revenue diversification could help NGOs to maintain sta-bility through soliciting funding from a variety of sources. Portfolio and firm diversification theory and its impact on risk and return, (ii) deregulation of the international and Brazilian financial systems, and (iii) empirical evidence . Precise measurement of revenue diversification in the budget portfolio, however, has not received much attention. that revenue diversification is, indeed, a statistically significant determinant of debt per capita, which also has an indirect effect on property tax burdens, the cross-state study suggests that revenue diversification has a impact on certain statmitigating e-imposed fiscal rules, further The concept of revenue diversification (RD) is grounded on Markowitz's (1952) Modern Portfolio Theory. Modern portfolio theory suggests that more diversification reduces volatility at the expense of reduced expected revenue.
This article investigates whether revenue diversification leads to greater stability in the revenue structures of nonprofit organizations. By understanding effective revenue diversification strategies . stakeholders enhance revenue diversification; and (d) revenue diversification does not help organizations maintain financially sustainable. . modern portfolio theory; nonprofit financial health; revenue diversification; ASJC Scopus subject areas. 30. doi: 10.1111/pbaf.12309 This Article is brought to you for free and open access by the Department of Public Management and Policy at More specifically, revenue diversification takes the form of interest and non-interest income. Download Free PDF Download PDF Download Free PDF View PDF. Resource Dependency & Revenue Diversification Strategy Resource dependence theory (Pfeffer & Salancik, 1978) suggests that "the key to organizational survival is the ability to acquire and maintain resources" (p. 2). This research examines the consequences of revenue diversification on institutional financial and research outcomes at public research universities in the US, using hierarchical linear modeling, psychometric approaches, and mediation analysis. Intelligent business owners diversify their revenue. We use different measures of revenue diversification and rely on audited financial information to develop general fund-based and government-wide budgetary solvency measures for more than 500 midsized and large cities in the U.S. from 2006 to 2012. Based on contingency theory, it is assumed that different missions are . A guiding principle for much of this research is modern portfolio theory, the concept that one can minimize risk and maximize return through asset diversification. Data were collected via in-depth semistructured interviews, and member checking was used to facilitate accuracy, . REVENUE DIVERSIFICATION By JOHN A. C. CONYBEARE I. This article examines whether revenue diversification or concentration strategies lead to greater mission outputs in a nonprofit context. Consistent with traditional portfolio theory, the results show that loan portfolio diversification leads to improvements in bank stability, as measured by the Z-score index, as . The authors conclude that the effect of diversification of revenue varies when the size of nonprofit organization are put into considerations. Modern portfolio theory suggests that more diversification reduces volatility at the expense of.
10.1111/pbaf.12309 . Article Revenue Diversification, Risk and Bank Performance of Vietnamese. However, the authors acknowledge a need for further studies on the methodology of revenue diversification to develop an informed insight into how resource dependency theory can be used in managing the . Previous studies informed by the public choice/fiscal illusion perspective suggest that diversification leads to unsustainable government expansion and budgetary imbalance. The basic dimensions are the diversification of income sources and broadening within loan portfolio. adequate financial resources. The purpose of this single-case study was to explore revenue diversification strategies used by 3 leaders of a nonprofit organization in western California of the United States using Markowitz's modern portfolio theory as the conceptual lens. In this context, rationales for diversification are discussed including portfolio theory and resource dependence theory. This paper examines (1) whether revenue diversification leads to greater instability as represented by revenue volatility, and (2) whether revenue complexity produces fiscal illusion as represented 130 Institutional Constraints, RuleFollowing, and Circumvention: Tax and Expenditure Limits and the Choice of Fiscal Tools During a Budget Crisis
This study explores . Value: The study adds value to the theory building and extend knowledge frontier in diversification-performance relationships, while providing an evidence-based integrated theoretical framework . through the conceptual lens of modern portfolio theory. It aims to maximize returns by investing in . The study then develops a conceptual model to assess the impact of changes in revenue diversification, as well changes in state policy and institutional context, on three financial and five educational outcomes during the recent recession. 11 Revenue diversification in emerging market banks: implications for financial performance. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.If asset prices do not change in perfect synchrony, a diversified portfolio will have less variance than the weighted average variance of its constituent . The key findings are: (i) There is a significant positive association of market competition in risk-taking. Revisiting the theory of revenue diversification: Insights from an empirical analysis of municipal budgetary solvency Public Budgeting & Finance . Saoussen Ben Gamra * Dominique Plihon ** Abstract. explore revenue diversification strategies that leaders of small NPOs can use to minimize organizational risk. Successful diversification simultaneously reduces "concentration risk" and offers numerous other benefits to revenue, profitability and business resilience. Effect on sales team compensation and performance objectives. In theory, an organization can resist economic shocks by spreading out its income sources from a mixture of grants, donations, fees, corporate gifts, social enterprise, and special events. . The Role of Business Sophistication, Revenue Diversification, and Labor Relations on Firm Financing Choice} . Existing theories of financial intermediation imply . Major Theories Concerning Revenue Diversification and Revenue Concentration Originally developed by Markowitz ( 1952 ), modern portfolio theory (MPT) describes how a risk-averse investor can select an optimal investment portfolio to maximize expected returns and minimize volatility. This study reviews the influence of revenue stream diversification on financial health. Noted economist and laureate Harry Markowitz came up with a theory in 1952 which is today known as MPT (Modern Portfolio Theory). . The trend of revenue diversification, according to the portfolio theory, has far-reaching implication for public financial management as it may change revenue stability, which has been an important policy objective for state and local government administrators. However, empirical studies on the relationship between revenue diversification and financial health have produced mixed results.
From portfolio theory comes the idea that revenue diversification can reduce financial vulnerability to recession and other external economic shocks.
By understanding effective revenue diversification strategies . Main Menu; by School; by Literature Title; by Subject; by Study Guides; Textbook Solutions Expert Tutors Earn. We find that this relationship should not be taken for granted. The results suggest that increased reliance on non-tax revenue sources, such as charges and fees, improves budgetary solvency. The study targeted 577 personnel under Directorate of Revenue, Department of Finance and Planning Kisumu County Government. The diversification of revenue sources for charitable nonprofits has been written about extensively. increasing revenue diversification in the . De Paula and Marques . Revenue diversification and bank performance the current issue and full text archive of this journal is available on emerald insight at: exploring the inuence . The theory's central proposition is that investors can maximize the expected return rate and minimize risk by choosing the right combinations of various assets in the portfolio. through the conceptual lens of modern portfolio theory. The theory's central proposition is that investors can maximize the . explore revenue diversification strategies that leaders of small NPOs can use to minimize organizational risk. In short, revenue diversification is regarded as a cushion strategy for nonprofit organizations to battle against financial instability and uncertainty ( Kingma, 1993; Tuckman & Chang, 1991 ). Revenue diversification is a critical component of overall revenue mix, and it requires a holistic approach based on five key revenue diversification levers: continued education, research and innovation, services, asset utilization, and partners (see Figure 1). Social Sciences (miscellaneous) Access to Document. This study examines how different types of organizational missions affect the level of revenue diversification of organizations in one industry, a question that was neglected in previous research. Data
The concept of revenue diversification (RD) is grounded on Markowitz's (1952) Modern Portfolio Theory. Figure 1 Revenue diversification is just not affordable for every organization.
Until the 1990s, the public finance literature treated revenue . " A Pure Theory of Local Expenditures . INTRODUCTION: THE THEORY OF RENT SEEKING INSOFAR as economists attempt to explain political phenomena, they do so in terms of behavior to which they refer as rational rent-seeking action on the part of individuals who wish to manipulate the state. As far as market diversification goes, maybe this kitchen and bath retailer's focus was the 25 - 25 year-old age group who are involved in buying and stocking their first homes with items.
The authors conclude that the effect of diversification of revenue varies when the size of nonprofit organization are put into considerations. Data were gathered on 814 private, non-research universities from multiple sources including the Delta Cost Project dataset and the Integrated Postsecondary Education Data System. One of the ways in which the rent-seeking state may maximize the resources it extracts from taxpayers is through diversification of the tax revenue base. By diversifying income streams, firms avoid unexpected downturns of the A unique dataset is built and utilized . revenue collection on financial performance of Kisumu County Government. In contrast, the organizational adaptation/modern portfolio theory suggests that diversification enables government to prepare for external . Diversification strategy, as we already know, is a business growth strategy identified by a company developing new products in new markets. Normative theory suggests that nonprofits should concentrate on sources that are uniquely associated with the benefits to be afforded to a particular population group or groups. Trends show that suburbs with higher increases in diversification . Diversification Diversification is a portfolio allocation strategy that aims to minimize idiosyncratic risk by holding assets that are not perfectly positively correlated. Using resource dependence theory as a guiding framework, two opposing hypotheses are tested to gain more insight into the diversification versus concentration dilemma. That definition tells us what diversification strategy is, but it doesn't provide any valuable insight into why it's an ideal business growth strategy for some companies or how it's implemented. In this context, rationales for diversification are discussed including portfolio theory and resource dependence theory. This study examines the trends in revenue diversification in approximately 240 suburban municipalities in the Chicago metropolitan region between 1988 and 1997. 1. To this end, we use a sample of 275 banks from fourteen MENA countries over 1990-2011. We investigate the relationship between revenue diversification and volatility for nonprofits. The concept of revenue diversication is derived from Modern Portfolio Theory articulated by Markowitz (1952), which describes the process by which an investor selects a particular investment . The beneficial effects of diversified income portfolios are well documented in previous research on non-profit organizations. As such, policies which . Recent economic events have shown us how important it is to diversify revenue and not be dependent on just one source of income.
Business-level product diversification - Expanding into a new segment of an industry that the company is already operating in. Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. A nonprofit's agility in reacting to environmental changes largely determines its success in fulfilling one's mission. Agency cost theory 4 Classical diversification hypothesis 11 Competition stability hypothesis 3 Market power theory 3 Modern portfolio theory 30 Theory offinancial intermediation 7 . Revenue diversification in banking takes different dimensions.
Optimal taxation theory uses a general equilibrium approach to focus on the trade-off between equity goals and the deadweight loss of taxation. . Similarly, from the perspective of portfolio theory, revenue diversification could be used to increase revenue stability and reduce financial risk by developing a mix or balance of multiple revenue sources (Froelich 1999; Mayer . As a result, public higher education institutions have been under increasing pressure to diversify their funding sources through tuition fees and other nonpublic revenues. This integration of . Data were gathered on 814 private, non-research universities from multiple sources including the Delta Cost Project dataset and the Integrated Postsecondary Education Data System. . Diversification can occur at the business level or at the corporate level. That being said, diversification of revenue is not a one-size-fits-all solution to an organization's struggle to maintain growth. Therefore, the study demonstrates the existence of a stable long-run U-shaped relationship between revenue diversification and return on assets. The theory's central proposition is that investors can maximize the expectedreturnrateandminimizeriskbychoosingtherightcombinationsofvariousassets in the portfolio. To diversify your company horizontally means introducing brand new products or services to your current offering in order to expand market share, either in a new market segment or your company's existing market. Data were collected via in-depth semistructured interviews, and member checking was used to facilitate accuracy, . revenue diversification, both lead to improvement in risk-adjusted profitability as well as reduce the likelihood of insolvency of banks. Although these findings are only suggestive, this study is a significant step forward in the development of a theory of nonprofit financial performance including the analysis of revenue diversification which ABSTRACT The aim of this paper is to investigate the effects of revenue diversification on bank performance while shedding light on the impact of the shift towards non-interest income sources. The May 2020 Consensus Revenue Estimating Conference projected revenue declines of $3 billion in both Fiscal Year (FY)2020 and FY2021. The benefit of having more than one income stream is when one income. Study Resources. Details of theory is as below. Diversification, the 'fix' for concentration risk, is an idea that is sensible in theory but difficult in execution. Product diversification is a strategy employed by a company to increase profitability and achieve higher sales volume from new products. Revenue diversification may benefit banks if diversified activities are inherently less risky and possess high returns, while it may hurt banks if diversified activities are more risky and have low returns. However, the authors acknowledge a need for further studies on the methodology of revenue diversification to develop an informed insight into how resource dependency theory can be used in managing the . 2. The study was anchored on revenue diversification and optimal taxation theories. REVENUE DIVERSIFICATION The concept of revenue diversification is derived from Modern Portfolio Theory articulated by Markowitz (1952), which describes the process by which an investor selects a particular investment portfolio.
INTRODUCTION: THE THEORY OF RENT SEEKING JNSOFAR as economists attempt to explain political phenomena, they Ado so in terms of behavior to which they refer as rational rent-seeking action on the part of individuals who wish to manipulate the state. Revenue Diversification in Large U.S. Cities. The problem is that some nonprofit managers lack strategies for developing a diversified financial portfolio to achieve sustainability. What diversification means Diversification is the act of investing in a variety of different industries, areas, and financial instruments, to. Our findings suggest that nonprofits can indeed reduce their revenue volatility through diversification, particularly by equalizing their reliance on earned income, investments, and contributions . This article reflects on the institutional impact of those changes by analyzing a panel . This study explores how revenue diversification affects Find the latest published documents for revenue diversification, Related hot topics, top authors, the most cited documents, and related journals . more accurately understand why revenue diversification is a sound strategy. Theoretical Background The idea behind this research is to explore the relationship of corporate diversification on the practice of tax avoidance based on agency theory. Updated numbers from the August conference are a bit cheerier with a revenue decline of only $0.9 billion in FY2020 and $2.5 billion in FY2021 from January revenue estimates. The trend of revenue diversification, according to the portfolio theory, has far-reaching implication for public financial management as it may change revenue stability, which has been an important policy objective for state and local government administrators. Theory provides conflicting predictions about the impact of greater diversification of activities on the performance of financial intermediaries.
We investigate the relationship between revenue diversification and volatility for nonprofits. Resource dependence theory states that an organization is controlled by the sources of funding on which they rely to operate. In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. Correlation research design was used. Correlation is simply the relationship that two variables share, and it is measured using the correlation coefficient, which lies between -11. 10.1177 . Most nonprofits can't manage all those different funding sources. The concept of revenue diversification (RD) is grounded on Markowitz's (1952) Modern Portfolio Theory. MPT demonstrated that a diversified portfolio was less volatile . The rationale behind this technique contends that a portfolio constructed of different . It is the first in the revenue diversification literature to consider the total revenues and costs of operating government and incorporates a broader base of tax and non-tax revenue sources including utilities. (ii) Revenue diversification of banks supports the portfolio investment theory in risk management, which means that diversified sources of income have apparent influence in risk. theory is grounded on the premise that MFIs were established to fight poverty through empowering the poorest of the economically active poor (Marwa and Aziakpono, 2015;