The influence of ownership and compensation practices on charitable activities

Leslie G Eldenburg, Fabio B. Gaertner, Theodore H. Goodman

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

Recent accounting research provides evidence that similar profit-based compensation incentives are used in for-profit and nonprofit hospitals. Because charity care reduces profits, such incentives should lead for-profit hospital managers to reduce charity care levels. Nonprofit hospital managers, however, may respond differently to the same incentives because they face a different set of institutional pressures and constraints. We compare the association between pay-for-performance incentives and charity care in for-profit and nonprofit hospitals. We find a negative and significant association between charity care and our proxy for profit-based incentives in for-profit hospitals, and no significant association in nonprofit hospitals. These results suggest that linking manager pay to profitability does not appear to discourage charity care in nonprofit hospitals. Apparently, the nonprofit mission, institutional pressures, and ownership constraints moderate the potentially negative effects of profit-based incentives. Because this evidence partially alleviates concerns over nonprofit compensation arrangements that mirror those used in for-profit hospitals, it should be of interest to regulators and policymakers. In addition, this study provides insights into accounting researchers about institutional and organizational influences that affect managerial responses to financial incentives in compensation contracts.

Original languageEnglish (US)
Pages (from-to)169-192
Number of pages24
JournalContemporary Accounting Research
Volume32
Issue number1
DOIs
StatePublished - Mar 1 2015

Fingerprint

Ownership
Charity
Incentives
Profit
Managers
Institutional pressures
Incentive compensation
Financial incentives
Profitability
Institutional ownership
Politicians
Pay-for-performance
Institutional constraints
Accounting research

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

The influence of ownership and compensation practices on charitable activities. / Eldenburg, Leslie G; Gaertner, Fabio B.; Goodman, Theodore H.

In: Contemporary Accounting Research, Vol. 32, No. 1, 01.03.2015, p. 169-192.

Research output: Contribution to journalArticle

Eldenburg, Leslie G ; Gaertner, Fabio B. ; Goodman, Theodore H. / The influence of ownership and compensation practices on charitable activities. In: Contemporary Accounting Research. 2015 ; Vol. 32, No. 1. pp. 169-192.
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