The relation between cost-system design, managers’ evaluations of the relevance and usefulness of cost data, and financial performance: an empirical study of US hospitals

This study examines the association between cost-system functionality, managers’ beliefs about the relevance and usefulness of cost data, and actual financial performance using a sample of 277 US hospitals. Results indicate that managers’ evaluations of the relevance and usefulness of cost data are positively correlated with the extent to which systems can provide greater cost detail, better classify costs according to behavior, and report cost information more frequently. However, only the ability to supply cost detail is favorably associated with measures of financial performance, including operating margin, cash flow, and administrative expense. Interestingly, cost-system design was not associated with operating expense per admission, suggesting that accounting information had not yet been successfully used to manage clinical costs.     

When are outside directors effective?

This paper uses recent regulations that have required some companies to increase the number of outside directors on their boards to generate estimates of the effect of board independence on performance that are largely free from endogeneity problems. Our main finding is that the effectiveness of outside directors depends on the cost of acquiring information about the firm: when the cost of acquiring information is low, performance increases when outsiders are added to the board, and when the cost of information is high, performance worsens when outsiders are added to the board. The estimates provide some of the cleanest estimates to date that board independence matters, and the finding that board effectiveness depends on information cost supports a nascent theoretical literature emphasizing information asymmetry. We also find that firms compose their boards as if they understand that outsider effectiveness varies with information costs.     

The ‘ladder of success’ in healthcare: the UK national reference costing index

Relative performance evaluation (RPE) is a form of benchmarking that operates through ranking institutions in comparative league tables. This paper explores issues raised by the introduction of RPE to benchmark UK hospital costs (termed ‘reference’ costs for this purpose). These reference costs are aggregated into a comparative cost index—thereby creating a ‘ladder of success’.The ‘ladder of success’ has the potentiality both to enhance the purchasing role and to provide a comparative database for hospitals to improve their performances. Yet this research found that several problems confound its use for benchmarking: the absence of a referent (or standard) against which ‘reference’ costs can be compared; the non-comparability of many hospitals featuring in the index; and the lack of standardisation in costing practices.In terms of refining and developing the index to enhance its usefulness, there are several possibilities: distinguishing between direct and indirect costs; introducing benchmarking ‘cluster groups’; pinpointing an acceptable range of target costs; and reducing the scope of clinical activities included. However, if any of these alternatives were adopted, the power of a single comprehensive measure that attaches one—and only one—number to each trust would be lost. The issue is that in making the index more meaningful, political leverage over the UK trusts would be reduced. Hence, despite all its associated problems, this research concludes that the ‘ladder of success’ looks likely to continue in its present form.     

Competitive Pricing in Markets with Different Overhead Costs: Concealment or Leakage of Cost Information?

This paper experimentally investigates how leaders and followers in a duopoly set prices for two product markets that have different overhead costs. In a fully crossed two-by-two design, we manipulate the participants' private cost report quality as either low or high, representing the extent to which these reports reveal that product markets have different overhead costs. We show that when only the leader is given a high-quality cost report, private cost information of higher quality is better incorporated into market prices (that are observable to participants). Both the leader and follower improve in profits and their prices better reflect the differences in overhead costs because the follower infers information from the leader's prices (information leakage). In contrast, when only the follower receives a high-quality cost report, the leader's profits and prices do not improve. This occurs because the follower conceals cost information when the leader has a low-quality cost report.     

Institutional Drivers of Reporting Decisions in Nonprofit Hospitals

We examine the influence of normative and regulative institutional factors on cost shifting by nonprofit hospitals in their publicly reported statements. We explore whether normative constraints imposed by stakeholders, who prefer that nonprofit hospitals allocate their resources toward patient‐related program services, influence the extent to which nonprofit hospitals shift costs toward program services and away from administrative and fundraising categories, thereby appearing more efficient. We also explore whether regulative factors, such as oversight, influence cost shifting behaviors. Results indicate that nonprofit hospitals facing higher normative pressures to demonstrate efficiency shift costs to a greater extent, and hospitals facing higher regulatory oversight shift costs to a lesser extent. Consistent with prior research, we also find that hospitals that obtain higher donations revenue shift costs to a greater extent. Our results show that, in addition to economic factors documented by prior literature, institutional factors also influence nonprofit hospitals’ cost shifting behaviors.     

模糊厌恶下股指期货风险对冲策略设计及实证分析

投资者对股指期货与现货有着不同的模糊厌恶,本文首先将此假设条件引入带交易成本的Garleanu and Pederson (2013)投资模型中,并以指数基金对冲策略为例,构建了一个股指期货动态对冲的理论模型。与非对冲策略相比,基于上述模型设计的对冲策略投资绩效更好,动态最优成交额占目标交易额的比例更小,目标成交额对收益率预测因子的敏感性更大。借助上述模型,本文选取2010年4月至2021年6月的中国ETF指数基金和股指期货数据,并以2015年9月股指期货管理措施实施为界进行区间划分,实证研究发现:(1)中国A股市场的ETF投资组合进行股指期货对冲显著提升了投资绩效,但股指期货管理会削弱该作用;(2)投资绩效改善主要来源于交易成本的下降与目标成交额因子敏感性的提升,该机制受到股指期货管理的约束;(3)与Garleanu and Pederson (2013)、Zhang et al. (2017)相比,本文对冲策略保留“抗跌”特点的同时增加了“易涨”特性。本文研究结果表明,在当前大力发展机构投资者的背景下应不断丰富股指期货、股指期权产品谱系,降低股指期货交易成本并完善持仓约束。     

The Accuracy of Proportional Cost Models: Evidence from Hospital Service Departments

Using data from hospitals in the state of Washington, we examine the time-series behavior of overhead costs. We find that more accurate predictions of changes in costs are usually generated by assuming a cost will not change at all (except for inflation) than by assuming that the cost will change in proportion to changes in activity. We also find that nearly all of the effect of a change in activity on costs appears to occur in the same year as the change in activity. Finally, using a multi-period regression model we find that the proportion of variable costs in the hospital overhead accounts is apparently very modest. These results suggest that costing systems, such as activity-based costing, that assume costs are proportional to activity, will grossly overstate relevant (i.e., incremental) overhead costs for decision-making and performance evaluation purposes.     

Do We Have a Redundant Set of Cost–Efficiency Targets in the NHS?

There has been a long history of hospital trust cost–efficiency targets being used in the National Health Service (NHS), but there is little evidence about whether they are effective in reducing hospital unit costs and reducing the dispersion of unit costs between trusts. In 1997, the new Labour government announced that it would replace the purchaser efficiency index with a new approach to securing cost–efficiency gains from trusts. Since 1999/2000 trust efficiency targets have been based on reference costs. This article presents evidence to suggest that efficiency targets have not been effective and that the new reference cost based system of targets is irrelevant. The efficiency gains that trusts seek to achieve are those that emerge from the purchaser funding formula and the contracting process.     

Participation Costs and the Sensitivity of Fund Flows to Past Performance

We present a simple rational model to highlight the effect of investors' participation costs on the response of mutual fund flows to past fund performance. By incorporating participation costs into a model in which investors learn about managers' ability from past returns, we show that mutual funds with lower participation costs have a higher flow sensitivity to medium performance and a lower flow sensitivity to high performance than their higher‐cost peers. Using various fund characteristics as proxies for the reduction in participation costs, we provide empirical evidence supporting the model's implications for the asymmetric flow‐performance relationship.     

Deregulation, Deposit Markets, and Banks' Costs of Funds

Deposit interest rate deregulation and financial service innovation have led to dramatic changes in large banks' deposit composition. This paper presentes a statistical cost analysis of changes in unit costs faced by banks under comprehensive financial deregulation. The results of this paper show that the unit cost of retail deposits-demand and passbook savings deposits-has increased relative to wholesale deposits-federal funds, certificates of deposit, and money market time deposits. We show, contrary to conventional wisdom, that changes in unit costs have been caused by processing costs rather than by interest expenses.     

Rating mutual funds: Construction and information content of an investor-cost based rating of Danish mutual funds

We develop a new rating of mutual funds: the atpRating. The atpRating assigns crowns to each individual mutual fund based upon the costs an investor pays when investing in the fund in relation to what it would cost to invest in the fund's peers. Within each investment category, the rating assigns five crowns to funds with the lowest costs and one crown to funds with the highest costs.We investigate the ability of the atpRating to predict the future performance of a fund. We find that an investor who has invested in the funds with the lowest costs within an investment category would have obtained a risk-adjusted excess return that is approximately 3–4 percentage points higher per annum than if the funds with the highest costs had been invested in.We compare the atpRating with the Morningstar Rating. We show that one reason why the atpRating and the Morningstar Rating contain different information is that the returns Morningstar uses as inputs when rating funds are highly volatile whereas the costs the atpRating uses as inputs when rating funds are highly persistent. In other words, a fund that has low costs one year will most likely also have low costs the following year, whereas the return of a fund in a certain year generally contains only little information about the future return that the fund will generate.Finally, we have information on the investments in different mutual funds made by a small subgroup of investors known to have been exposed to both the atpRating and the Morningstar Rating. We find that investors have clear preferences for funds rated high by both the atpRating and the Morningstar Rating.     

公立医院全面成本管理的探索与实践——以河南中医药大学人民医院为例

全面成本管理是医院管理的重要内容,以全面成本管理为手段建立公立医院优质、高效、低耗的内部运行新机制是当前公立医院改革的必然要求。公立医院要想实现健康、快速、可持续发展,必须全面控制费用、降低成本、提高运行效率。河南中医药大学人民医院在构建科学的成本管控体系、实施全面精细化成本管控方面进行了积极探索,取得了良好的效果,为其他医院成本控制提供了有益的借鉴。     

Uncertainty, Real Options, and Cost Behavior: Evidence from Washington State Hospitals

This study tests an implication of the real‐options theory of investment, that uncertainty leads firms to prefer technologies with low fixed and high variable costs. In 1983, a change in Medicare reimbursement increased the uncertainty of revenues for hospitals. Using a sample of 831 departments in 59 Washington State hospitals over the 1977–1994 period, we find that the ratio of variable to total costs increased after 1983. This increase is not attributable to a gradual increase in the ratio over time: We estimate a significant increase after 1983 even after controlling for a time trend. Further, we find a greater increase in the variable‐to‐total cost ratio for hospitals that had higher percentages of Medicare patients, increasing our confidence in the conclusion that the change in cost behavior is attributable to Medicare's change in reimbursement.     

Relative Target Setting and Cooperation

A large stream of work on relative performance evaluation highlights the benefits of using information about peer performance in contracting. In contrast, the potential costs of discouraging cooperation among peers have received much less attention. The purpose of our study is to examine how the importance of cooperation affects the use of information about peer performance in target setting, also known as relative target setting. Specifically, we use data from an industrial services company where business unit managers need to share specialized equipment and staff with their peers to manage bottlenecks in their capacity. We construct several empirical proxies for the costs and benefits of information about peer performance and examine their effects on target setting. We find robust evidence that the sensitivity of target revisions to past peer performance is higher when peer group performance has greater capacity to filter out noise but lower when the importance of cooperation among peers is greater.     

Moderating Role of Cost Accounting Information Quality on the Relationship Between the COVID-19 Pandemic and Budgeting in Public Hospitals

Based on new public management, information processing theory and contingency theory, this study investigates the impact of the COVID-19 pandemic on budgeting in public hospitals, focusing on budget use. The research hypotheses were tested using a survey of 82 responses from hospital CFOs. The results show that the organisations that were most affected by the pandemic increased their use of budgets for planning, resource allocation and control, compared to those that were less affected. This study also highlights the moderating role of cost accounting information quality in the relationship between crises and budget use. We find that public hospitals that have been most affected by the pandemic and have simultaneously better cost accounting information have increased their use of budgets for planning, resource allocation and cost control more than those whose costing system does not provide superior cost data.     

Environmental performance and analyst information processing costs

This study tests whether the information processing costs of analysts vary positively with the environmental performance information available on the firms they follow. Consistent with this conjecture, we find that these costs increase when analysts process a wider array of environmental performance ratings. Specifically we find that as the number of environmental performance ratings increases, analysts cover fewer firms in their portfolio, provide fewer earnings-per-share (EPS) forecast revisions, and make less timely forecast revisions. Two additional tests confirm that our results relate to environmental performance information and not to confounding factors. First, the “shock” of the Global Warming Solutions Act of 2006 implemented for California firms in 2012 increases analyst information processing costs incremental to the main effect of environmental performance ratings. Second, analyst information processing costs increase further in the year a firm covered by an analyst provides a CSR report for the first time. Our results have implications for firm managers considering voluntary environmental disclosure and investors deciding on what stocks to include in their socially responsible portfolios because when processing costs are high, analysts will provide less information or less timely information, resulting in more gradual price discovery in capital markets.     

Making nonroutine decisions--what cost measure is appropriate?

It would be simple if there were just one correct measure of cost. Unfortunately, every time we use cost information, the most important thing we do is determine which costs are appropriate for answering the question that has been asked. The degree of accuracy in calculating those costs will have to depend on how valuable the information is. The more important it is to have very accurate information, the more effort should be made to get such information. However, we cannot even begin the process of cost measurement until we have defined which costs to measure. In routine management, we have taken the time to refine the definition of what cost information is appropriate for the efficient running of ongoing activities. In the area of nonroutine decisions, however, everything is new. It is therefore critical for managers to spend some time thinking about which things really will change as a result of the change. Only those factors should enter into the calculation.     

Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan

Many governments have perceived the rural moneylender as usurious.This article takes a first step toward directly testing thevalidity of this view. In a study of services, costs, and chargesof fourteen informal market moneylenders and their clients inChambar, Pakistan, the article examines whether the high implicitinterest rates charged reflect the actual costs of operatingin that market. Estimates of the resource costs incurred byinformal lenders for screening, pursuing delinquent loans, overhead,and cost of capital (including unrecoverable loans) suggestthat lenders' charges are equal to their average cost of lendingbut exceed their marginal cost. This finding is consistent withthe view that the informal credit market is characterized byexcess capacity and monopolistic competition in the presenceof imperfect information.     

Rosalind Enterprises: A mini-case for ensuring student mastery of cost behavior concepts in short-term decisions

Cost behavior and its use in decision making is a fundamental part of all cost and managerial accounting courses. Yet, our experience is that students often accept treatment of differential costs and revenues, and the related emphasis on contribution margin, based on faith rather than understanding. In many cases, even after solving problems considering fixed costs as irrelevant, they still express a great deal of intellectual conflict and doubts. Statements like: “If the company only considers variable costs, how is it going to cover its fixed costs and make a profit?” and “All products should be made to bear their fair share of all costs” are far from rare occurrences. Such statements reflect a less-than-thorough grasp of the uses and limitations of some key cost concepts and their use in decision making. This is a worrisome state of affairs because as managers, students will mostly see unit costs that lump together variable and fixed costs. Even when given a breakdown of costs by behavior, the information still may not be in a form needed to facilitate effective decision making. The aim of this case is to deepen student understanding of the uses and limitations of unit cost data that include averaged or allocated fixed costs. The case, which is best used as an introductory exercise to the topic area, focuses on a two-product situation where the profitability of both products is affected by changes with respect to one product. The accompanying teaching note shows how different types of questions asked by students can be used as the basis for an exciting and fruitful class discussion. While textbooks are full of problems like this case, their accompanying solutions in manuals typically do not go beyond the provision of the correct computations. Given this background, the contribution of this case is not in the presentation of a novel situation or problem. Rather, it is in showing how the discussion process of a typical, simple end-of-chapter problem can be structured to actively involve the students through layers of complexity to solidify their understanding of some key concepts.     

Correspondent services and cost economies in commercial banking

Prior bank cost function studies have ignored the fact that some banks obtain a substantial amount of services from their correspondents. If these services are paid for with compensating deposit balances, their cost to the purchasing bank is not reflected in standard expense reports. This paper investigates whether explicit consideration of theese correspondent costs materially affects estimated bank returns to scale. The results indicate that the level of banksoperating costs is underreported by as much as 15%. While scale economy estimates for unit banks are not significantly affected by the addition of correspondent service costs, prior studies have overestimated branch bank scale economies by a small but statistically significant amount.