Capital Structure, Ownership, and Capital Payment Policy: The Case of Hospitals uri icon

abstract

  • This study examines effects of pertinent features of hospital capital payment policies on hospital capital structure decisions in a oneperiod stochastic, valuemaximization model. Separate models are developed for forprofit and notforprofit hospitals. Hospital debttoassets ratios are analyzed empirically using a crosssection of data from the American Hospital Association. Although the effect on capital structure of hospital reliance on costbased reimbursement cannot be signed theoretically, in both forprofit and notforprofit cases, a higher costbased share leads to higher leverage. Factors associated with high bankruptcy risk (e.g., earnings volatility) cause hospitals to take on less debt. 1988 The American Finance Association

author list (cited authors)

  • WEDIG, G., SLOAN, F. A., HASSAN, M., & MORRISEY, M. A.

citation count

  • 65

complete list of authors

  • WEDIG, GERARD||SLOAN, FRANK A||HASSAN, MAHMUD||MORRISEY, MICHAEL A