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

Leslie G Eldenburg, Ranjani Krishnan

Research output: Contribution to journalArticle

57 Citations (Scopus)

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 2003

Fingerprint

Business performance
Incentives
Private governance
Chief executive officer
Margin
Operating performance
Factors
Tax
Governance structure
Board of directors

Keywords

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

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Public versus private governance : A study of incentives and operational performance. / Eldenburg, Leslie G; Krishnan, Ranjani.

In: Journal of Accounting and Economics, Vol. 35, No. 3, 08.2003, p. 377-404.

Research output: Contribution to journalArticle

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