The effect of peer ratings on nonprofit contributions: evidence from charity navigator

Abstract

Nonprofit rating organizations publish third-party assessments of nonprofit organizations for current and prospective donors. Using charity-level yearly financial and ratings data for organizations rated by Charity Navigator, a prominent nonprofit rating organization, I employ a regression discontinuity design to investigate whether a charity's total contributions are impacted by changes in the ratings of its competitors. I find a negative relationship between current-period peer rating and current-period contributions, which is consistent with peer ratings being used to inform donation decisions between comparable organizations. However, difficulty substantiating a key identifying assumption of the RDD raises doubts that these findings identify a causal relationship.