TY  - JOUR
AU  - Brown,Jeffrey
AU  - Dimmock,Stephen G.
AU  - Kang,Jun-Koo
AU  - Weisbenner,Scott
TI  - How University Endowments Respond to Financial Market Shocks: Evidence and Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15861
PY  - 2010
Y2  - April 2010
UR  - http://www.nber.org/papers/w15861
L1  - http://www.nber.org/papers/w15861.pdf
N1  - Author contact info:
Jeffrey R. Brown
Department of Finance
University of Illinois at Urbana-Champaign
515 East Gregory Drive
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu

Stephen G. Dimmock
Division of Finance and Banking
Nanyang Technological University
Singapore, 639798
Tel: 65 6790-6119
E-Mail: dimmock@ntu.edu.sg

Jun-Koo Kang
Nanyang Technological University
Singapore
E-Mail: JKKANG@ntu.edu.sg

Scott Weisbenner
University of Illinois at Urbana-Champaign
Department of Finance
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820
Tel: 217/333-0872
Fax: 217/244-9867
E-Mail: weisbenn@illinois.edu
M2  - featured in NBER digest on 2010-07-01
AB  - Endowment payouts have become an increasingly important component of universities’ revenues in recent decades. We test two leading theories of endowment payouts: (1) universities smooth endowment payouts, or (2) universities use endowments as self-insurance against financial shocks.  In contrast to both theories, 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 with values 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, including personnel cuts.
ER  -