Abstract
Nonprofit firms can be multi-stakeholder organizations, in which employees, clients, volunteers, public institutions, and funders can have formal or informal power to affect corporate strategy. This paper focuses on nonprofit firms' orientation toward clients and investigates its role in shaping capital structure. We first develop a theoretical framework and derive conditions under which the relationship between leverage and client orientation - measured by how much nonprofit firms weigh clients' utility relative to earnings - is either positive or first negative and then positive. We then provide an empirical analysis of social cooperatives in the Italian social care sector and find a negative relationship between leverage and client orientation - proxied by the ratio of voluntary workers to total workforce.