WP 33 | 12 Stakeholder orientation and capital structure: Social enterprises versus for-profit firms in the Italian social residential service sector
In this paper, we investigate whether capital structure differs between for-profit and nonprofit sectors by focusing on two key aspects of the latter: the non-distribution constraint and the stakeholder oriented governance system. We develop a theoretical model and show that the former negatively affects leverage, defined as the amount borrowed over the total investment, whilst the latter has a positive effect. We then analyze a longitudinal data set of balance sheets of 800 firms operating in the social residential sector in Italy and show that, once controlled for observable characteristics, for-profit companies have a leverage 18% higher than nonprofit enterprises, even if the latter face lower credit costs. We explain this finding by arguing that the effect of the non-distribution constraint prevails over the effect of stakeholder orientation.
