Ownership type and earnings management in U.S. hospitals

James N. Cannon, Melvin A. Lamboy-Ruiz and Olena V. Watanabe

Advances in accounting, 2022, vol. 58, issue C

Abstract: We examine variation in accrual-based and real earnings management in U.S. hospitals by ownership type, using a stable comprehensive sample of hospitals from 2011 through 2016. We expect managers' reporting incentives to differ between ownership type (for-profit versus non-profit), resulting in differing uses of accrual and real earnings manipulations. First, we document that non-profit hospitals exhibit lower levels of both income-increasing and income-decreasing earnings manipulations than for-profit hospitals do. Second, we find that compared to non-profit hospitals, for-profit hospital managers use discretionary accruals (in particular) to create larger reserves when pre-managed earnings are high and to increase reported earnings more when pre-managed earnings are low. Together, these findings suggest that, relative to non-profit hospital managers, for-profit hospital managers have incentives to report higher and more consistent earnings.

Keywords: Hospitals; Earnings management; Non-profit organizations (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:58:y:2022:i:c:s0882611022000311

DOI: 10.1016/j.adiac.2022.100612

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