Five-Star Ratings and Managerial Turnover: Evidence from the Nursing Home Industry

41 Pages Posted: 29 Jun 2020

See all articles by James A. Brickley

James A. Brickley

University of Rochester - Simon Business School

Susan F. Lu

Purdue University - Krannert School of Management

Gerard J. Wedig

University of Rochester - Simon Business School

Date Written: January 28, 2020

Abstract

The government-sponsored Five-Star Quality Rating System (FSQRS) aggregates multiple measures of nursing home quality into a standardized overall rating. Previous research has found that the FSQRS affected consumer demand and correspondingly motivated a strategic shift towards competing for higher ratings, most notably among nursing homes in more competitive markets. The primary objective of this paper is to provide evidence on whether it produced a complementary change in the weight placed on quality ratings in senior management retention decisions. Using the Florida nursing home administrator files from 2007 to 2013, our analysis reveals that the FSQRS motivated a substantial and significant increase in the sensitivity of administrator turnover to star ratings, particularly in more competitive nursing home markets.

Keywords: Disclosure, Quality, Governance, Competition, Turnover, Complementarity

JEL Classification: I18, L15, J63, G24, G34

Suggested Citation

Brickley, James A. and Lu, Susan Feng and Wedig, Gerard J., Five-Star Ratings and Managerial Turnover: Evidence from the Nursing Home Industry (January 28, 2020). Available at SSRN: https://ssrn.com/abstract=3619662 or http://dx.doi.org/10.2139/ssrn.3619662

James A. Brickley

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160L
Rochester, NY 14627
United States
585-275-3433 (Phone)
585-442-6323 (Fax)

Susan Feng Lu (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

HOME PAGE: http://https://sites.google.com/site/susanluhome/home

Gerard J. Wedig

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

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