Financial Reporting Manipulation And The Role Of Religious Ownership: Evidence From Nonprofit Hospitals
type: CreativeWork
description: Empirical evidence (e.g. Eldenburg and Vines 2004; Leone and Van Horn 2005; Ballantine et al. 2007; Eldenburg et al. 2011) demonstrates that nonprofit hospital managers respond to competing institutional and regulatory pressures by engaging in various forms of financial reporting manipulation. While some recent research in accounting (e.g. Dyreng et al. 2012; McGuire et al. 2012) shows that religious social norms can deter this undesirable behavior, these studies focus on the private, for-profit sector and use a location-based measure of religiosity. This study extends this line of research by using a more direct measure of religious social norms, the ownership affiliation of a hospital, in a nonprofit setting. Using quarterly and annual data for all nonprofit hospitals in the state of California, this study empirically examines the relationship between the nature of hospital ownership (i.e. secular vs. religious) and two types of financial reporting manipulation: earnings management and classification management. Consistent with social norm theory, findings indicate that religious hospitals manage earnings to a lesser extent than secular hospitals. However, religious and secular hospitals do not appear to differ with respect to strategic charity care classification. Supplemental tests indicate that the earnings management result is driven by fourth-quarter differences and that the effect is especially pronounced for the Medicaid payor. Additional analyses also consider a potential shock to managerial incentives as a result of recent healthcare regulatory changes. Although overall earnings management appears to be greater after the passage of the Patient Protection and Affordable Care Act in 2010, there is no evidence to suggest that the effect of hospital ownership on financial reporting changed as a result of the legislation. This study contributes to the growing literature on the influence of religious affiliation on corporate behavior, as well as the nature, tim…
abstract: Empirical evidence (e.g. Eldenburg and Vines 2004; Leone and Van Horn 2005; Ballantine et al. 2007; Eldenburg et al. 2011) demonstrates that nonprofit hospital managers respond to competing institutional and regulatory pressures by engaging in various forms of financial reporting manipulation. While some recent research in accounting (e.g. Dyreng et al. 2012; McGuire et al. 2012) shows that religious social norms can deter this undesirable behavior, these studies focus on the private, for-profit sector and use a location-based measure of religiosity. This study extends this line of research by using a more direct measure of religious social norms, the ownership affiliation of a hospital, in a nonprofit setting. Using quarterly and annual data for all nonprofit hospitals in the state of California, this study empirically examines the relationship between the nature of hospital ownership (i.e. secular vs. religious) and two types of financial reporting manipulation: earnings management and classification management. Consistent with social norm theory, findings indicate that religious hospitals manage earnings to a lesser extent than secular hospitals. However, religious and secular hospitals do not appear to differ with respect to strategic charity care classification. Supplemental tests indicate that the earnings management result is driven by fourth-quarter differences and that the effect is especially pronounced for the Medicaid payor. Additional analyses also consider a potential shock to managerial incentives as a result of recent healthcare regulatory changes. Although overall earnings management appears to be greater after the passage of the Patient Protection and Affordable Care Act in 2010, there is no evidence to suggest that the effect of hospital ownership on financial reporting changed as a result of the legislation. This study contributes to the growing literature on the influence of religious affiliation on corporate behavior, as well as the nature, tim…
author: Seay, Ryan
keywords: Charity Care, Classification Management, Contractual Allowances, Earnings Management, Financial Reporting Manipulation, Accounting
date published: 2014-01-01T08:00:00Z
date modified: 2026-07-24T03:05:28Z
provider: University of Mississippi
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Mississippi