Using data from Ontario hospitals, we investigate the conjecture that the stickiness of costs would be greater for functions that relate to an organization's core competency. We find operating costs for the hospital as a whole are sticky. Moreover, we find higher stickiness in costs pertaining to patient care relative to costs in other functions. Indeed, there is no evidence of stickiness in the operating costs of support departments that are peripherally related to the hospital's mission.
for providing analyst forecast data, available through the Institutional Brokers' Estimate System.These data have been provided as part of a broad academic program to encourage earnings expectation research.We also thank those companies, and the Securities and Exchange Commission, which generously provided copies of Form 20-Fs and Form 20-F filing dates for our research project.'cancelled out' in the averaging process that determines equilibrium prices" (Bamber and Cheon 1995, 418;Kim and Verrecchia 1991).Consequently, when investigating information content, price reaction and trading volume reaction may not yield identical results even for the same event (Bamber and Cheon 1995).Moreover,
This paper uses a principal-agent model to study the interaction between hedging and earnings management. Hedging makes earnings management more difficult and they appear to be strategic substitutes in this model, which is both consistent with existing empirical evidence and provides a new explanation for that evidence. If hedging decision is contractible, hedging is efficient since it reduces both the risk premium and the equilibrium amount of earnings management. If hedging decision is not contractible, however, hedging does not always alleviate the agency problem. Surprisingly, sometimes a scenario of no hedging but allowing earnings management is efficient. The reason is that motivating hedging may require a more costly compensation scheme to mitigate the appeal of earnings management. In addition, this paper shows that tolerating some earnings management is always efficient when there is no hedge option, since it is costly to eliminate earnings management. Sometimes it is inefficient to take any action against earnings management. However, with the encouraged hedge option, the cost to eliminate earnings management can be reduced significantly and zero tolerance of earnings management may be efficient.
This paper analyzes the association between ownership, top management incentives, and expenditures on accounting information. We argue that organizations with privately appointed boards of directors such as for-profit and non-governmental nonprofit organizations use incentive pay practices which encourage managers to use accounting information to improve performance. In contrast, government organizations are publicly governed and are constrained in their compensation practices because hospital CEOs are administrators of government provided services. However, these hospitals must prove their efficiency to continue to receive adequate budgetary funding. Therefore government hospitals are more likely to use accounting information to gain legitimacy with stakeholders and regulators. Accordingly, we predict a positive relationship between expenditures on accounting information and contracting intensity in privately governed organizations, whereas we expect no such association for publicly governed organizations. We analyze data from California hospitals to determine differences in these roles across ownership types. We find a positive association between contracting intensity and expenditures on accounting information in privately governed hospitals, but no relation in publicly governed hospitals. Finally, we find differences in the use of accounting information within the privately governed hospitals, based on ownership. While for-profit hospitals expend resources on accounting information that helps improve their revenue positions, nonprofit hospitals expend resources on accounting information that facilitates decision-making related to operating efficiency and cost containment.
Screening potential investments involves dividing a set of companies into those that are suitable to consider for investment and those that are less desirable (Kinder 2005). In this paper, I document that nonprofessional investors (represented by MBA students) are susceptible to scale compatibility effects when implementing an investment screen using non-financial measures. Such effects occur when investors rely more on a scale compatible non-financial measure whose values directly map into investors' judgments than on an equally relevant but scale incompatible measure whose values do not map into their judgments. Results from an experiment indicate that investors reduce their susceptibility to scale compatibility effects when they simultaneously screen several companies for potential investment. Because screening investments involves screening several companies, simultaneous screening represents an efficient mechanism to de-bias scale compatibility effects.