Investment Decisions of Nonprofit Firms: Evidence from Hospitals

Journal Article (Journal Article)

This paper examines investment choices of nonprofit hospitals. It tests how shocks to cash flows caused by the performance of the hospitals' financial assets affect hospital expenditures. Capital expenditures increase, on average, by 10 to 28 cents for every dollar received from financial assets. The sensitivity is similar to that found earlier for shareholder-owned corporations. Executive compensation, other salaries, and perks do not respond significantly to cash flow shocks. Hospitals with an apparent tendency to overspend on medical procedures do not exhibit higher investment-cash flow sensitivities. The sensitivities are higher for hospitals that appear financially constrained.

Full Text

Duke Authors

Cited Authors

  • Adelino, M; Lewellen, K; Sundaram, A

Published Date

  • August 1, 2015

Published In

Volume / Issue

  • 70 / 4

Start / End Page

  • 1583 - 1628

Electronic International Standard Serial Number (EISSN)

  • 1540-6261

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/jofi.12234

Citation Source

  • Scopus