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

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 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Public Budgeting, Accounting & Financial Management Emerald Publishing

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

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1096-3367
DOI
10.1108/JPBAFM-29-01-2017-B001
Publisher site
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Abstract

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.

Journal

Journal of Public Budgeting, Accounting & Financial Management – Emerald Publishing

Published: Mar 1, 2017

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