A Comparison of Earnings Management between Not-for-Profit and For-Profit Hospitals

Essam Elshafie, Northeastern IIlinois University
Pervaiz Alam, Kent State University

ABSTRACT: The purpose of this paper is to compare earnings management patterns of not-for-profit (NFP) hospitals and for-profit (FP) hospitals. Most of prior studies on earnings management use samples of either FP organizations (e.g., Burgstahler and Dichev 1997) or NFP organizations (e.g., Leone and Van Horn 2005). Using a sample of hospitals from the State of California over the period of 1995-2005, this study is the first to compare directly between earnings management practices of the two types of organizations. The study shows that the FP hospitals are involved in more aggressive earnings management practices. The results show that FP hospitals tend to manipulate earnings upward more aggressively when their earnings before discretionary accruals are poor, and they downplay their earnings more than their NFP hospitals counterparts when their earnings before discretionary accruals are exceptionally high.

Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.

Back to Session Listing