Earnings management in non-public companies: the case of for-profit hospice organizations

We examine earnings management in non-publicly listed companies, with a focus on for-profit (FP) hospice organizations, and extend the accounting earnings management literature to the hospice industry. FP hospice organizations file Medicare cost reports that include complete financial statements not...

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Bibliographic Details
Published in:Journal of public budgeting, accounting & financial management accounting & financial management, 2017, Vol.29 (1), p.1-19
Main Authors: Noe, Kelly, Forgione, Dana A, Smith, Pamela C, Liu, Hanni
Format: Article
Language:English
Subjects:
Accruals
Companies
Cost control
Debt
Earnings
Earnings management
Financial statements
Hospice care
Industrial organization
Management
Medicare
Profitability
Profits
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Summary:We examine earnings management in non-publicly listed companies, with a focus on for-profit (FP) hospice organizations, and extend the accounting earnings management literature to the hospice industry. FP hospice organizations file Medicare cost reports that include complete financial statements not otherwise publicly available. Managers of FP hospice organizations have incentives to manage earnings to increase performancebased bonuses, meet or beat bond covenant requirements, or avoid public scrutiny. We find total accruals are significantly positively associated with profitability, debt, and size factors. However, discretionary accruals are significantly negatively associated with debt and size, but not profitability. Thus, monitoring and political cost factors appear to effectively mitigate earnings management in this industry sector.
ISSN:1096-3367
1945-1814
DOI:10.1108/JPBAFM-29-01-2017-B001