Organizational Antecedents of Restricted Funding in UK Charities

Abstract

Abstract Restricted funding has become a notable feature of the nonprofit sector in many countries. While its organizational outcomes are widely debated, we know less about why some nonprofits face higher levels of restriction than others. This study examines organizational antecedents using agency and signaling perspectives, asking how nonprofits’ observable financial and organizational features shape their level of restricted funding. Drawing on panel data for charities in England and Wales (2007–2023), we find that higher financial reserves are associated with lower levels of restricted funding, whereas greater service-area breadth and wider beneficiary breadth are associated with higher restriction levels. Administrative cost ratios are not a significant predictor. These findings provide new insights into restricted funding dynamics and offer practical implications for nonprofits seeking to navigate funding constraints.