Diffusion of Minimally Invasive Procedures across Hospitals and Traits of Fast Adopting Hospitals

The quality and cost of hospital care depends not only on what technologies have been developed, but on how quickly the most promising and cost-effective technologies diffuse across hospitals. Some technologies are high-cost when they are first introduced into the health care system, but improve in cost-effectiveness as doctors use the technologies and innovate. Some such examples are minimally invasive procedures, which have become more common in recent years. We sought to better understand what hospital characteristics are associated with fast adoption of four minimally invasive procedures (appendectomy, lobectomy, hysterectomy and colectomy). Our findings show that a hospital’s adoption of minimally invasive procedures in one type of procedure (e.g., lobectomy) is not predictive of that hospital’s probability of adopting minimally invasive procedures in another procedure type (e.g., zero appendectomies). The only hospital characteristic consistently correlated with adoption for three of the four procedure types was the extent that the hospital’s geographic neighbors had adopted minimally invasive technology for that particular procedure. These findings regarding peer effects fall in line with conclusions about diffusion from the development literature.     

The impacts of marketization and subsidies on the treatment quality performance of the Chinese hospitals sector

This paper investigates the treatment quality of the hospitals sector in China during 2009–2014. The treatment quality of a hospital is higher if relatively more medical services are provided with fewer deaths. Our research question is twofold: (i) Does the pressure of for-profit lower treatment quality by causing more deaths? (ii) Can government subsidy raise treatment quality by releasing the pressure from market competition? Our empirical results show that the treatment quality in China has been improving during the studied period. There are pieces of evidence that both marketization and government subsidies can boost the treatment quality of the hospitals sector. The co-existence of market force and government regulation is beneficial to the patients.     

Supply-induced demand for medical services under price regulation: Evidence from hospital expansion in China

In 2009, China launched a nationwide reform to overhaul its enormous healthcare system. Subsequently, government spending on healthcare increased significantly. Simultaneously, public hospitals experienced rapid expansion. This study empirically examines whether supply-induced demand existed for public hospitals during the expansion process, based on hospital longitudinal data from 2007 to 2016, which is matched with individual patient data. We found that medical expenditure increased rapidly, while the quality of medical services did not change significantly during the hospital expansion. In addition, due to the price regulation of medical services, public hospitals mainly passed on the costs of expansion by inducing hospitalization and diagnostic over-testing. Furthermore, supply-induced demand was more obvious in diseases for which doctors had more asymmetric information. Based on the evidence provided in this study, the expansion of public hospitals has resulted in a waste of healthcare resources and a rise in the healthcare burden on patients. This has certain implications for further deepening the reform of public hospitals.     

Understanding Audit Quality: Insights from Audit Professionals and Investors

Projects seeking to define, measure, and evaluate audit quality are on the agendas of auditing standards setters as well as audit firms. The Public Company Accounting Oversight Board (PCAOB) currently provides information regarding audit quality through the release of inspection reports, and the Board intends to establish and report audit quality indicators. To provide additional perspective on audit quality, we obtain auditors' and investors' views, definitions, and indicators of audit quality. We find that investors' definitions of audit quality focus more on inputs to the audit process than do auditors', and that investors view the number of PCAOB deficiencies as an indicator of overall firm quality. We find a consensus that auditor characteristics may be the most important determinants of audit quality, and that restatements may be the most readily available signal of low audit quality. We relate responses to a general audit quality framework, provide support for archival audit research, and identify additional disclosures that participants suggest could signal audit quality. Taken together, we provide evidence regarding the construct of audit quality in the post‐SOX environment, evaluate many of the audit quality indicators proposed by the PCAOB, and suggest avenues for future research.     

So Many Hospitals,So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance

As part of the Patient Protection and Affordable Care Act, participating hospitals have part of their Medicare reimbursements withheld and then redistributed based on quality performance. The Hospital Value‐Based Purchasing reimbursement plan relies partly on ordinal rankings of hospitals to determine how money is distributed. We analyze the quality metric score distributions that underlie payment redistribution and show that there is not enough information to reliably differentiate hospitals from one another near the program point cutoffs, and conclude that a large part of the payment formula is driven by sampling variability rather than true quality information. An alternative plan for rewarding hospitals is developed.     

The Focus Efficiency of U.S. Hospitals

Hospital productivity has been a research topic for over two decades. Whereas much has been learned regarding cost, technical, scale, and allocative efficiency as well as the impact that weakly disposable inputs/outputs have on hospital behavior, we expand on this research by examining size and service offering, or focus, efficiency at the metropolitan area level for US hospitals. By using an extension of the Free Coordination Hull (FCH), we are able to determine whether hospitals in our sample could become more efficient if they provided more services (reduce inefficiency due to too narrow a focus) or fewer services (reduce inefficiency due to too broad a focus). Our results suggest that findings vary among the hospital markets. This approach could be used by policy makers and managers in order to reduce costs by sharing services, reducing services in hospitals, or expanding services in hospitals. Findings from a study such as this should aid reform programs by providing more information on the sources of hospital inefficiency.     

Endogenous Price Leadership and the Strategic Acquisition of Information

We model a differentiated Bertrand duopoly in which a firm's earlier knowledge of market demand than its competitor results in endogenous price leadership with the information advantaged firm leading. In such a setting with second‐mover advantage, we then study the firms’ incentives to acquire information and analyze an information acquisition game. Both (i) neither firm acquiring information and (ii) one firm acquiring information can arise as subgame perfect equilibrium, but both firms acquiring information is never an equilibrium outcome, even if information is free. Information may have a negative value if it causes a change in the timing of price competition.     

Management Quality, Ownership, Firm Performance and Market Pressure in Russia

We investigate whether management quality explains firm performance in Russia. We find that it explains relatively little in terms of firm performance, but it does explain some of the differences between firms in Russia’s Far East and the rest of Russia. Firms that have always been in private ownership perform better than state-owned firms. While management practices may not yet affect firm performance in a measurable way, they may do so in the future. This conjecture motivates us to look at the determinants of firms’ adoption of good management practices. We find that market pressure, both in the product and the labour market, has some impact on adoption of management practices, in particular in the Far East. It thus appears that the economy in Russia’s Far East may function according to different rules than in the rest of Russia, as market forces seem to be stronger there, in particular, because the Far East is more exposed to foreign competition than the rest of Russia.     

R&D subsidy,intellectual property rights protection,and North–South trade: How good is the TRIPS agreement?

This paper investigates the competition in technology and production between a firm in the North (developed country) and a firm in the South (developing country), and how such competition may be affected by the North’s subsidy on technology improvement and the South’s intellectual property rights (IPR) protection level. It is argued that allowing the North to choose the policy first could bring Pareto improvement. This paper also shows that requiring only the South to tighten its IPR protection (as required by the TRIPS agreement) without putting similar pressure on the North to provide more R&D hurts the South. A more rewarding outcome exists if both the IPR protection level and the technology subsidy rate are chosen optimally. We point out that maximizing world welfare does not consequently hurt the South, or require a tightening of IPR protection in the South.     

How Does Intrinsic Motivation Improve Auditor Judgment in Complex Audit Tasks?

Intrinsic motivation is generally thought to be positively associated with performance on a variety of tasks. However, there is only sparse experimental evidence supporting this idea and we know little about the specific mechanisms behind any effect. We develop theory about how auditors’ intrinsic motivation for their jobs can improve their judgments about complex accounting estimates. We experimentally test whether a prompt to make auditors’ intrinsic motivation for their jobs salient improves the specific information processing behaviors necessary for high‐quality judgments in complex audit tasks. It does: Prompted auditors attend to a broader set of information, process information more deeply, and request more relevant additional evidence. Supplemental analyses show that these processing behaviors mediate between salient intrinsic motivation and an improved ability to identify a biased complex estimate. Our theory and analyses indicate that auditors’ intrinsic motivation for their work provides unique value for improving judgment quality, particularly in the context of performing complex audit tasks. Our study supports the view that high‐quality cognitive processing can improve auditors’ professional skepticism by providing a foundation for skeptical judgments.     

Can Empirical Demand Models Assist in CON Comparative Reviews? A Case Study in Florida

Certificate‐of‐Need (CON) programs for new hospital construction are intended to foster the best selection among competing hospital applications, given demands for hospital care in the community. Yet, the merits of CON depend in part on the quality of the comparative review process. This article examines a case study in Florida to illustrate the utility of empirical evaluations using patient choice models. I estimate such models to show how patients would respond to a change in hospital choices. By simulating the welfare effects of the proposed hospitals, I can further predict how prices of hospital care differ by applicant. Results suggest that empirical analysis using data on patient choice of hospitals may better inform the review process. At the same time, however, it may not give a unique ranking without additional analysis of the fixed costs of proposed services in the context of existing marketwide capacity.     

Does Mandatory IFRS Adoption Improve the Information Environment?*

More than 120 countries require or permit the use of International Financial Reporting Standards (IFRS) by publicly listed companies on the basis of higher information quality and accounting comparability from IFRS application. However, the empirical evidence about these presumed benefits is often conflicting and fails to distinguish between information quality and comparability. In this paper we examine the effect of mandatory IFRS adoption on firms’ information environment. We find that after mandatory IFRS adoption consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. We also find decreasing forecast errors for voluntary adopters, but this effect is smaller and not robust. Moreover, we show that the magnitude of the forecast error decrease is associated with the firm‐specific differences between local GAAP and IFRS. This finding suggests that it is IFRS adoption rather than a correlated unobservable factor that is causing forecast errors to decrease. Exploiting individual analyst level data and isolating settings where analysts would benefit more from either increased comparability or higher quality information, we document that the improvement in the information environment is driven both by information and comparability effects. These results suggest that mandatory IFRS adoption has improved the quality of information intermediation in capital markets, and as a result firms’ information environment, by increasing both information quality and accounting comparability.     

Job training and organizational performance: Analyses from medical institutions in China

The benefit of training on economic outcomes has been well-documented in previous literature, as training is generally recognized as one of the important approaches in human capital investment. However, the return of employee training on organizational level performance is not verified sufficiently, especially in the healthcare field. By taking advantage of a dataset with the information on all medical institutions in Sichuan, China over 2012–2016, this paper investigates the effects of employee training on medical institution’s performance through the Propensity Score Matching (PSM) method and the Event Study approach. The results show that training benefits medical institution performance in some indicators, such as total visits, outpatient visits, non-medical-insurance, and local competitiveness. These effects, however, vary across different types of medical institutions. Grassroot medical institutions in the county area that serve as a health gatekeeper (known as primary health care institution, PHCIs) gain most in hospital visits after training. In addition, training results in a 16.5% increase in the average performance wage for county-PHCIs, and a 52.8% increase in the employees’ performance wage for higher-level general hospitals in cities. In general, by participating in training, PHCIs in county region gain more in the overall revenue through the non-medical-insurance income.     

Abstracts/Résumés

We investigate how private information and monitoring affect the role of accounting quality in reducing the investment–cash flow sensitivity. We argue that access to private information and direct restrictions on investments are likely to affect the extent to which accounting quality reduces financing constraints. Our results suggest that, for financially constrained firms, banks’ access to private information decreases the value of accounting quality. We further find that, for both financially constrained and unconstrained firms, covenants directly restricting capital expenditures also mitigate the importance of accounting quality. Our results suggest that, when information asymmetry problems are likely to be the largest, accounting quality is most important. However, the importance of accounting quality is mitigated if outside capital suppliers have access to private information and is eliminated if they impose contractual restrictions on investment. We also provide evidence that banks’ access to private information reduces the cash flow sensitivity of cash and mitigates the importance of accounting quality in reducing this sensitivity. This additional evidence suggests that our investment–cash flow sensitivity results are not driven by measurement error of the investment opportunity set.     

Improving Jurors' Evaluations of Auditors in Negligence Cases*

Prior research indicates that individuals acting as jurors experience outcome effects in audit negligence litigation. That is, jurors evaluate auditors more harshly in light of negative outcomes, even when audit quality is constant. I posit that outcome effects in this setting are caused by jurors using their negative affect (i.e., feelings) resulting from learning about negative audit outcomes as information relevant to auditor blameworthiness. I tested this hypothesis in an experiment in which I manipulated audit quality, outcome information, and provision of an attribution instruction. The attribution instruction was designed to discredit negative affect as a cue to auditor blameworthiness. Consistent with expectations, attribution participants' evaluations of auditors exhibited less reliance on outcome information and more reliance on audit quality information than did evaluations made by control participants. In fact, outcome effects were eliminated for attribution participants. Courts may be able to improve the quality of jurors' decisions in such cases by employing an attribution instruction.     

Pricing to market, firm heterogeneity and the role of quality

We build a pricing-to-market (PTM) model with firm heterogeneity, which allows for imperfect competition and market segmentation in the presence of flexible exchange rates, horizontal and vertical differentiation and different tastes of consumers in destination markets. We derive firm’s pricing behaviour in response to price and quality competition shocks. We show that there is PTM heterogeneity across firms if quality has a role. We empirically assess the main predictions of our theoretical framework on Italian firm-level data. We document that export-domestic price margins are significantly affected by price and quality competitiveness factors even controlling for foreign demand conditions, size, export intensity, destination markets and unobservables. Finally, we provide evidence of strong heterogeneity across firms in their reaction to price and quality competitiveness.     

Abstracts/Résumés

This paper examines whether credit analysts utilize the information contained in the difference between book and taxable income in analyzing a firm’s credit risk. Increased book–tax differences may be informative for credit rating agencies as they may signal decreased earnings quality or changes in the firm’s off–balance sheet financing. Results suggest a significant negative association between positive changes in book–tax differences and ratings changes. This evidence is consistent with large positive changes in book–tax differences signaling decreased earnings quality and/or increased off–balance sheet financing. We also find that large negative changes in book–tax differences result in less favorable rating changes, consistent with these changes signaling decreased earnings quality. In additional analyses, we find that the association between changes in book–tax differences and rating changes is attenuated for high–tax‐planning firms (e.g., where book–tax differences more likely reflect tax planning than decreased earnings quality).     

Commitment and Cost of Equity Capital: An Examination of Timely Balance Sheet Disclosure in Earnings Announcements

In this paper, I examine the relation between disclosure commitment and cost of equity capital using accelerated earnings announcement disclosures as a measure of commitment. In settings characterized by imperfect market competition, I find that firms which consistently disclose balance sheet detail in relatively timely earnings announcements have lower costs of capital compared to other firms. This result is statistically significant and economically meaningful, and is robust to various alternative measurements for cost of capital, and alternative designs addressing endogeneity and underlying information quality. Overall, this result is important because it highlights additional dimensions of disclosure commitment (consistency and timeliness), while incorporating important features from theoretical models (information quality and market competition). In particular, my results suggest that consistency and timeliness are salient features of firms' disclosure behavior that have predictable and robust relations with capital market outcomes. This result is robust to controlling for underlying information quality; however, consistent with theory, it is conditional on low levels of market competition.     

Using export market performance to evaluate regional preferential policies in China

We evaluate the effectiveness of two types of preferential regional policy programs in China’s manufacturing sector. The primary goal of the Economic and Technological Development Zones (ETDZs) is to facilitate internationalization strategies, while Science and Technology Industrial Parks (STIPs) aim to generate technology spillovers. Various dimensions of export market performance are used as objective indicators for the upgrading of product quality and firm operations. We compare startups that locate into one of these zones with startups on the outside, while controlling for self-selection using treatment evaluation methods. The results indicate that firms locating in an ETDZ achieve much higher export values, driven by higher volumes of trade and numbers of destinations. Firms locating in a STIP perform best on quality dimensions. In particular they fetch higher export prices and have more success exporting to high-income countries.     

Accounting Restatements and External Financing Choices*

There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO or CFO turnover and auditor dismissal. Our evidence indicates that accounting information quality affects capital providers’ resource allocation and that debt holders help alleviate information problems after accounting restatements.