Earnings Management in English NHS Hospital Trusts

20 Pages Posted: 22 Oct 2007

See all articles by Joan Ballantine

Joan Ballantine

University of Ulster; University of Ulster

John Forker

Queen's University Management School

Margaret Greenwood

University of Bath School of Management; University of Bath - School of Management


In this paper we review the financial reporting incentives associated with the requirement to breakeven for English NHS Trusts. We also investigate the distribution of reported income and estimate discretionary accruals thereby contributing to the limited literature on earnings management in not-for-profit hospitals. We find that Trust managers use discretion over accruals to report income within the target range around zero. The results are robust to recent challenges to earnings management explanations arising from the use of distributional and aggregate accruals methodologies. Our findings indicate that a precise and challenging financial breakeven target based on current cost residual income is associated with wide-spread use of discretionary accruals to an extent that weakens the accountability of NHS Trusts.

Suggested Citation

Ballantine, Joan Amanda and Ballantine, Joan Amanda and Forker, John and Greenwood, Margaret J. and Greenwood, Margaret J., Earnings Management in English NHS Hospital Trusts. Financial Accountability and Management, Vol. 23, No. 4, pp. 421-440, November 2007, Available at SSRN: https://ssrn.com/abstract=1022784 or http://dx.doi.org/10.1111/j.1468-0408.2007.00436.x

Joan Amanda Ballantine

University of Ulster ( email )

Jordanstown Campus
Shore Road
Newtownabbey, Northern Ireland BT37 0QB
Northern Ireland

University of Ulster ( email )

Northland Road
Londonderry, BT48 7JL
Northern Ireland

John Forker (Contact Author)

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland

Margaret J. Greenwood

University of Bath School of Management ( email )

Bath, BA2 7AY
United Kingdom

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 383227 (Phone)

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