Prediction of Financial Vulnerability to Funding Instability

Abstract

Financial vulnerability of nonprofit organizations arising from governmental funding instability is examined using hazard analysis. Funding instability is characterized by time-at-risk, and vulnerability is expressed by hazard rate measuring the speed of nonprofit organizations closure. The analysis provides estimation of instantaneous probability of a nonprofit organization failure at a given point in time. Drawing on 2,660 Israeli nonprofit organizations, we found that the relationship between hazard rate and time-at-risk has an inverted U–shape curve; hazard rate increases with time-at-risk, reaches a maximum then descends.