Differences in consumer-benefiting misconduct by nonprofit, for-profit, and public organizations

We examine how organizations of different types – nonprofit, for-profit, and public – engage in consumer-benefiting misconduct (CBM) by examining which patients benefit from hospitals of the three types gaming the market for liver transplants. Consistent with our theory, we find that public firms are the least likely of the three organization types to engage in CBM. We find that for-profit firms engage in CBM for any paying consumers, nonprofit firms engage in CBM for their mission-driven beneficiaries, and public organizations engage in CBM for the set of consumers that their voting constituents direct them to serve. We also examine how the three organization types respond to others’ engagement in CBM, and explore heterogeneity in CBM within nonprofit and public organizations. As the first paper to theoretically predict and empirically examine differences in CBM across nonprofit, public, and for-profit firms, this paper has important implications for our understanding of how distinct governance structures influence misconduct.