Public versus private governance: A study of incentives and operational performance

Leslie Eldenburg, Ranjani Krishnan

Research output: Contribution to journalArticle

60 Scopus citations

Abstract

This study explores incentives and performance in organizations governed by publicly elected boards of directors and subsidized by taxes. Such organizations are likely to underpay Chief Executive Officers (CEOs), resulting in selection and incentive problems and hence poor operating performance. We compare municipal district hospitals to private nonprofit hospitals. CEO compensation in district hospitals is significantly lower than in the nonprofits. Operating margins in district hospitals are lower and deteriorate more rapidly over time. We rule out a number of other factors that could explain differences in performance. We conclude that the weak governance structure hampers district hospitals.

Original languageEnglish (US)
Pages (from-to)377-404
Number of pages28
JournalJournal of Accounting and Economics
Volume35
Issue number3
DOIs
StatePublished - Aug 1 2003

Keywords

  • CEO compensation
  • Financial performance
  • Public governance
  • Tax subsidization

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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