Business and Management INK

Revenue Structure and Nonprofit Borrowing

February 1, 2011 771

Revenue Structure and Nonprofit Borrowing”, by Wenli Yan of Indiana University, Bloomington, Dwight V. Denison and J.S. Butler, both of the University of Kentucky, was the most frequently read article in Public Finance Review in 2009. Dr. Yan has provided additional background to the article:

My interest in this topic originates from my readings on portfolio theory in the Principles of Corporate Finance when I was a second-year doctoral student in the Martin School of Public Policy and Administration at the University of Kentucky. I was fascinated by the idea of lowering the risk of return by combining different stocks that do not move exactly in the same direction in an investment portfolio. This ignited my interest in exploring whether nonprofit organizations can use a similar strategy, lately known as revenue diversification, to effectively reduce the uncertainty of revenue streams. In years after my initial exposure to portfolio theory, I devoted myself to reading a broad range of literature on revenue diversification and portfolio management from corporate, nonprofit and public finance. I was surprised to find that many important empirical and theoretical questions regarding the dynamics between revenue mix and capital structure remained unanswered.  I viewed this as a unique opportunity to contribute to the literature and enhance our systematical understanding of revenue diversification and its application in nonprofit organizations, which I believe, can benefit their financial practices and performance in the long run. The popularity of this research shows the value of conducting cross-discipline research.

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