Edifice Complex: Building Ownership and Financial Strength of Nonprofit Theaters

This paper explores factors contributing to the financial capacity of nonprofit performing arts theaters. The analysis explains profitability and liquidity of 3,642 U.S. nonprofit theaters that filed IRS Form 990s from 1998-2007. Independent variables include measures developed by previous research on the financial health of nonprofit organizations, variables for different revenue streams as shares of total revenue, and exposure to real estate and mortgage debt. Findings show that controlling for organization age, size, and financial health measures, mortgage debt has a significant negative impact on theater profitability and negatively impacts liquidity for theaters with more than $1 million expenses. Contrary to common recommendations, revenue concentration, not diversification, and particularly having higher ratios of unearned, rather than earned, revenues correlate with greater financial capacity.