An integrated framework for understanding the financial health of small, private colleges.

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An integrated framework for understanding the financial health of small, private colleges.

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A certain segment of the higher education market typically goes unnoticed, that is until the circumstances are disastrous. The small, private college is unusually vulnerable in times of economic distress due, in part, to its fiscal independence. Unfortunately, a number of factors have caused a number of these small, private colleges to close over the past decade. The small private college sector is of interest because it is highly susceptible to decline and demise. Typically, institutions in this category do not have the enrollment volume, endowment strength and reputational clout to resist internal and environmental fluctuations or competition. Studying the financial health of small, private colleges provides an opportunity to explore variables that are positive and negative indicators of financial stability and instability. Using an integrated framework of institutional health conceptual framework this study explored the relationships between four families of independent variables (i.e., institutional characteristics, strategic choice, financial indicators and external environment) and the Department of Education's Test of Financial Strength score for 673 U. S. four-year, private institutions with fewer than 2,000 students in either the 1998-99 or 2008-09 academic years. The researcher utilized a repeated measures samples t-test and chi-square statistic to compare the set of institutions between 1998-99 and 2008-09. Various multiple regression model analyses were utilized for 1998-99 and 2008-09 data to explore the relationship between the dependent variable and several independent variables. The results of the study indicate that over the ten-year time period, there were statistically significant differences for small, private colleges in their endowments in constant dollars, cash and operating reserves, debt service, tuition dependency, cost to attend in constant dollars, total undergraduate and adult enrollment, years of operation, tuition increases, selectivity, faculty-to-student ratio, discount rate, unrestricted giving in constant dollars and the number of private colleges in the state. The four regression model analyses and results for 1998-99 demonstrated that small, private colleges with stronger operating and cash reserves, larger undergraduate enrollments, deeper donor bases as measured by unrestricted giving, longer presidential tenures, higher costs to attend, stronger retention rates and institutions more dependent on tuition, positively impacted the Department of Education Test of Financial Strength score. The results of the four regression models for 2008-09 demonstrated that small, private colleges with larger undergraduate enrollments, stronger cash reserves, deeper donor bases as measured by unrestricted giving, score significantly better than their peers on the Department of Education Test of Financial Strength score. Institutions with innovative online programs, stronger retention rates, lower discount rates and NCAA and NAIA athletic affiliations negatively impact the Test of Financial Strength score. According to the analysis, both internal and external factors explain levels of financial strength in small, private colleges as predicted by the conceptual framework.


University of Minnesota Ph.D. dissertation. August 2012. Major: Educational Policy and Administration. Advisors: Dr. Darwin D. Hendel and Dr. David Weerts. 1 computer file (PDF); xiv, 252 pages, appendices A-G.

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Hunter, James Michael. (2012). An integrated framework for understanding the financial health of small, private colleges.. Retrieved from the University Digital Conservancy,

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