Ownership Type and Earnings Management in U.S. Hospitals

Advances in Accounting (forthcoming)

55 Pages Posted: 26 Mar 2018 Last revised: 23 May 2022

See all articles by James N. Cannon

James N. Cannon

Iowa State University; Utah State University, School of Accountancy

Melvin A. Lamboy-Ruiz

Georgia Southern University; Iowa State University

Olena V. Watanabe

Iowa State University - Debbie and Jerry Ivy College of Business

Date Written: May 20, 2022

Abstract

Using a comprehensive sample from 2011 through 2016, we examine variation in earnings management in U.S. hospitals by ownership type. 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 managers, for-profit managers have incentives to report higher and more consistent earnings.

Keywords: hospitals; earnings management; non-profit organizations

JEL Classification: M41; M49

Suggested Citation

Cannon, James N. and Cannon, James N. and Lamboy-Ruiz, Melvin and Watanabe, Olena V., Ownership Type and Earnings Management in U.S. Hospitals (May 20, 2022). Advances in Accounting (forthcoming), Available at SSRN: https://ssrn.com/abstract=3149931 or http://dx.doi.org/10.2139/ssrn.3149931

James N. Cannon

Iowa State University ( email )

Ames, IA 50011-2063
United States
801-927-7718 (Phone)

Utah State University, School of Accountancy ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
801-927-7718 (Phone)

Melvin Lamboy-Ruiz

Georgia Southern University ( email )

Statesboro, GA 30460-8151
United States

HOME PAGE: http://https://parker.georgiasouthern.edu/soa/melvin-a-lamboy-ruiz/

Iowa State University ( email )

College of Business
Ames, IA 50011-2063
United States
5152947161 (Phone)

Olena V. Watanabe (Contact Author)

Iowa State University - Debbie and Jerry Ivy College of Business ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
148
Abstract Views
1,459
rank
285,215
PlumX Metrics