The Relation between Debt Financing and Not-For-Profit Hospitals’ Donations

Debt financing has been discussed extensively in corporate finance; however, previous studies seldom apply it to not-for-profit hospitals. Magnus et al. (2003) and Yetman (2007) argued that debt financing would have a negative impact on the charitable donations of notfor-profit hospitals, but they d...

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Bibliographic Details
Published in:Tai Da Guan Li Lun Cong 2014-06, Vol.24 (2), p.151
Main Authors: Kuo, Jenn-Shyong, Yi-Cheng, Ho, Lo, Kuang-Ta, 郭振雄, 何怡澄, 羅光達
Format: Article
Language:English
Subjects:
Appointees
Conversion
Debt financing
Donations
Nonprofit hospitals
Online Access:Get full text
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Summary:Debt financing has been discussed extensively in corporate finance; however, previous studies seldom apply it to not-for-profit hospitals. Magnus et al. (2003) and Yetman (2007) argued that debt financing would have a negative impact on the charitable donations of notfor-profit hospitals, but they did not provide empirical evidence. This study is the first paper to investigate the relationship between debt financing and donation revenue by using 38 notfor-profit hospitals from 2000 to 2006 in Taiwan. According to our empirical results, we have proved that debt financing has both a crowd-in effect and crowd-out effect on not-forprofit hospitals’ donations. The crowd-in effect tends to exist in low debt ratio hospitals, while the crowd-out effect is often found to exist in not-for-profit hospitals with higher debt ratios. We therefore conclude that Magnus et al. (2003) and Yetman (2007) only proposed the crowd-out effect of debt financing for not-for-profit hospitals; however, they did not consider the possible crowd-in effect of debt financing as we have demonstrated in this study.
ISSN:1018-1601
2410-2490
DOI:10.6226/NTURM2014.MAY.R11006