TY - JOUR
T1 - How university endowments respond to financial market shocks
T2 - Evidence and implications
AU - Brown, Jeffrey R.
AU - Dimmock, Stephen G.
AU - Kang, Jun Koo
AU - Weisbenner, Scott J.
PY - 2014/3
Y1 - 2014/3
N2 - Endowment payouts have become an increasingly important component of universities' revenues in recent decades. We study how universities respond to financial shocks to endowments and thus shed light on a number of existing models of endowment behavior. Endowments actively reduce payouts relative to their stated payout policies following negative, but not positive, shocks. This asymmetric behavior is consistent with "endowment hoarding," especially among endowments whose current value is close to the benchmark value at the start of the university president's tenure. We also document the effect of negative endowment shocks on university operations, such as personnel cuts. (JEL G35, I22, I23).
AB - Endowment payouts have become an increasingly important component of universities' revenues in recent decades. We study how universities respond to financial shocks to endowments and thus shed light on a number of existing models of endowment behavior. Endowments actively reduce payouts relative to their stated payout policies following negative, but not positive, shocks. This asymmetric behavior is consistent with "endowment hoarding," especially among endowments whose current value is close to the benchmark value at the start of the university president's tenure. We also document the effect of negative endowment shocks on university operations, such as personnel cuts. (JEL G35, I22, I23).
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U2 - 10.1257/aer.104.3.931
DO - 10.1257/aer.104.3.931
M3 - Article
AN - SCOPUS:84896922882
SN - 0002-8282
VL - 104
SP - 931
EP - 962
JO - American Economic Review
JF - American Economic Review
IS - 3
ER -