Governing for Impact:How Governance Policies Shape Nonprofit Performance?

This study investigates how governance policies shape organizational performance in nonprofit organizations. Drawing on agency theory, we distinguish between internal governance mechanisms—such as conflict-of-interest rules, monitoring systems, and executive compensation policies—and external mechanisms, including independent audits and financial oversight. Using a balanced panel dataset of 286,200 human service nonprofits in U.S. from 2017 to 2022 based on IRS Form 990 filings, we examine three dimensions of performance: volunteer engagement, program spending, and revenue per employee. Fixed-effects regression analyses reveal that internal governance practices significantly enhance volunteer engagement and program spending, while external governance practices primarily strengthen revenue performance and volunteer mobilization. These findings underscore the importance of adopting comprehensive governance frameworks to improve accountability, operational efficiency, and sustainability in the nonprofit sector.