For the first time a stylised model, in the tradition of corporate finance models for profit organisations described by Tirole (2006), is developed in order to understand the existence of financial constraints in nonprofit organisations and their relationship with the presence of agency problems. Financial constraints can be expected to arise when there are no substantial opportunities to increase revenues from fundraising and when nonprofit managers might not be willing to exert high fundraising efforts. Furthermore, under these circumstances more agency problems lead to lower debt levels. In situations without expected financial constraints, more agency problems are shown to go together with higher debt levels. Extending watchdog agencies' assessment methods to include default payments can limit or even eliminate financial constraints. The model also allows to understand why larger and chain affiliated organisations should suffer less from financing constraints. The very scant empirical literature's findings on the matter are shown to be reconcilable with the model's predictions.

In Belgian corporate groups, complex pyramidal structures and interlocking ownership lead to separation of ownership and control. This may generate incentives for the controlling shareholder to divert resources within the group through intragroup equity sales. This in turn could lead to significant private benefits at the expense of the minority shareholders. We test this hypothesis by investigating the stock price reaction to the announcement of equity sales in Belgian groups. Our results suggest that intragroup equity sales create value for minority shareholders. Equity sales between group members and non-group members do not seem to affect the value for minority shareholders in Belgian groups.