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  • Thumbnail for An Analysis of the Correlation of Online Ratings to the Fund Raising Success of Charitable Organizations
    An Analysis of the Correlation of Online Ratings to the Fund Raising Success of Charitable Organizations by Pham, Zhachary Render

    Charity Navigator (“CN”) is an on-line site that rates charities based on financial and accountability/transparency measures using a 0 to 4 “star” rating system. This study examines the correlation between the CN ratings of charities and their fund raising success, as defined by revenue growth rate. Potential factors that may influence a donor’s decision are also examined. Prior to testing the data, the possible variables that might influence the correlation between CN ratings and fundraising success are discussed. According to a regression incorporating 258 charities, the correlation of the star ratings to revenue growth was not statistically significant at a 95% confidence interval for 0, 1, 2 and 3 stars, but the coefficient of the 4-star binary variable was statistically significant at that confidence level. Additional regressions derived from sub-sets of charities based on different charitable causes indicate that the significance of CN stars on revenue growth rate varies between causes. Star ratings are not statistically significant at a 95% confidence interval for charities in the General Health and International Relief/Development sectors but are statistically significant at the 4-star level for the Veteran/Military sector and at the 3-star and 4-star levels for the Environmental sector. Overall, these findings suggest that, depending on the dynamics of the sector, ratings might affect a charity’s revenue growth but only at the higher CN rating level. Correlation between CN ratings and revenue growth rate appears to be strongest in highly competitive charity sectors and less significant in sectors where donors have limited choice and where a donor may have great personal connection to specific charities. These findings offer guidance to the management of charities looking to enhance their fund raising effectiveness.