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School of Business | Department of Accounting | Accounting | 2016
Thesis number: 14692
Does historical cost accounting affect foundation payout policy? - Empirical evidence from Finland
Author: Aalto, Jarkko
Title: Does historical cost accounting affect foundation payout policy? - Empirical evidence from Finland
Year: 2016  Language: eng
Department: Department of Accounting
Academic subject: Accounting
Index terms: tilinpäätös; balances of books; säätiöt; foundations; varallisuus; wealth
Pages: 72
Full text:
» hse_ethesis_14692.pdf pdf  size:2 MB (1070274)
Key terms: payout ratio; historical cost accounting; third sector; grant-making foundation; varojenjako; historiallinen kirjanpitoarvo; kolmas sektori; apurahasäätiö

The main purpose of the study is to study whether the choice of financial reporting approach has a significant relationship to the payout of Finnish grant making foundations. As motivation for the study were the scarcity of prior research of the subject and the less addressed economic importance of Finnish non-profit sector. The impact of financial reporting approach is examined using the book-to-market ratios of the grant-making foundations.


The main sample used in this study consists of 218 fiscal years and 109 foundations during fiscal years of 2010 and 2011. The foundations represent the largest grant-making foundations extracted from the database of 200 largest foundations in Finland. The organizational and financial data is mostly derived from a database compiled in 2014 for research and law reform of the Foundations Act in 2015. This database was furtherly checked and complemented using the financial statements as the main source of information and data. Ordinary Least Square regression is used to examine the connection between payout, determined as the scaled amount of annual distributions and independent variables, which are foundation specific determinants of payout.


The results of the conducted regression analysis show no significant relationship between book-tomarket ratio and annual payout of foundations. Thus, the effect of choice of financial reporting approach is not comprehensively confirmed. The results show that scaled market value of assets and revenues have significant and strong positive relationship with payout. General support had a significant but not a strong relationship with payout. Upon the results, the suitability of payout theories could not be confirmed regarding the payout policy of Finnish grant-making foundations. Additional analysis shows us that between different industries, there is an effect on the association between payout and determinants of the payout.
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