Electronic Theses and Dissertations

Date of Award


Document Type


Degree Name

Ph.D. in Accountancy



First Advisor

Dale Flesher

Second Advisor

Rachna Prakash

Third Advisor

Tonya Flesher

Relational Format



Empirical evidence (e.g. Eldenburg and Vines 2004; Leone and Van Horn 2005; Ballantine et al. 2007; Eldenburg et al. 2011) demonstrates that nonprofit hospital managers respond to competing institutional and regulatory pressures by engaging in various forms of financial reporting manipulation. While some recent research in accounting (e.g. Dyreng et al. 2012; McGuire et al. 2012) shows that religious social norms can deter this undesirable behavior, these studies focus on the private, for-profit sector and use a location-based measure of religiosity. This study extends this line of research by using a more direct measure of religious social norms, the ownership affiliation of a hospital, in a nonprofit setting. Using quarterly and annual data for all nonprofit hospitals in the state of California, this study empirically examines the relationship between the nature of hospital ownership (i.e. secular vs. religious) and two types of financial reporting manipulation: earnings management and classification management. Consistent with social norm theory, findings indicate that religious hospitals manage earnings to a lesser extent than secular hospitals. However, religious and secular hospitals do not appear to differ with respect to strategic charity care classification. Supplemental tests indicate that the earnings management result is driven by fourth-quarter differences and that the effect is especially pronounced for the Medicaid payor. Additional analyses also consider a potential shock to managerial incentives as a result of recent healthcare regulatory changes. Although overall earnings management appears to be greater after the passage of the Patient Protection and Affordable Care Act in 2010, there is no evidence to suggest that the effect of hospital ownership on financial reporting changed as a result of the legislation. This study contributes to the growing literature on the influence of religious affiliation on corporate behavior, as well as the nature, timing, and extent of financial reporting decisions of nonprofit hospitals. Furthermore, it has important implications for audit firms, creditors, potential donors, accounting researchers, and other hospital stakeholders. Finally, results from this research should generalize to other large industries within the nonprofit sector (e.g. higher education).

Included in

Accounting Commons



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