Using Certifications to Signal Trustworthiness and Reduce the Perceived Risk of Donors – An Exploratory Investigation into the Impact of Charity Labels

ABSTRACT Several accountability clubs and watchdogs issue charity labels for stimulating charitable giving, but research on the impact of such seals of approval built on certification systems is still narrow and contradictory. Based on signaling theory and theory of perceived risk, we develop a framework matching means of signaling trustworthiness by charities and of risk reducing by donors. Additionally, we present results of a study exploring the influence of the Austrian charity label “OSGS” on the donation behavior of 192 survey participants and investigate whether donors are more willing to support charities participating in this self-regulatory program. Our study provides insights into the benefits and constraints of voluntary accountability initiatives and enhances understanding of individuals’ motivations for giving. Findings indicate that expectations toward the OSGS are high and partly exaggerated. Nevertheless, we found that generally the OSGS is not crucial for charity choice but mainly beneficial for nonprofits not widely known.