IDEAS home Printed from https://ideas.repec.org/a/ucp/jnlbus/v62y1989i4p517-37.html
   My bibliography  Save this article

Hospital Investment Decisions and the Cost of Capital

Author

Listed:
  • Wedig, Gerard J
  • Hassan, Mahmud
  • Sloan, Frank A

Abstract

This study addresses two issues conceptually and empirically. How does hospital ownership type affect hospital investment choices? How do differences in the way hospitals are paid--cost- versus charge-based reimbursement--affect hospital investment? The authors compute cost-of-capital measures for both for-profit and not-for-profit hospitals. Whether or not hospital dependence on cost-based payment stimulates investment depends on the generosity of such payment relative to the economic cost of capital. Empirically, they find that for-profit hospital exit/entry decisions are guided by the generosity of payment to a greater extent than the not-for-profits. Copyright 1989 by the University of Chicago.

Suggested Citation

  • Wedig, Gerard J & Hassan, Mahmud & Sloan, Frank A, 1989. "Hospital Investment Decisions and the Cost of Capital," The Journal of Business, University of Chicago Press, vol. 62(4), pages 517-537, October.
  • Handle: RePEc:ucp:jnlbus:v:62:y:1989:i:4:p:517-37
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/296476
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Simon Benninga & Marshall Blume, "undated". "On the Optimality of Portfolio Insurance," Rodney L. White Center for Financial Research Working Papers 5-85, Wharton School Rodney L. White Center for Financial Research.
    2. Sanford J. Grossman, 1977. "The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 431-449.
    3. Benninga, Simon & Blume, Marshall E, 1985. " On the Optimality of Portfolio Insurance," Journal of Finance, American Finance Association, vol. 40(5), pages 1341-1352, December.
    4. Simon Benninga & Marshall Blume, "undated". "On the Optimality of Portfolio Insurance," Rodney L. White Center for Financial Research Working Papers 05-85, Wharton School Rodney L. White Center for Financial Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pizzini, Mina J., 2006. "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," Accounting, Organizations and Society, Elsevier, vol. 31(2), pages 179-210, February.
    2. Federico Ciliberto & Richard C. Lindrooth, 2007. "Exit From The Hospital Industry," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 71-81, January.
    3. Gentry, William M., 2002. "Debt, investment and endowment accumulation: the case of not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 21(5), pages 845-872, September.
    4. Suhui Li & Avi Dor, 2013. "How Do Hospitals Respond to Market Entry? Evidence from A Deregulated Market for Cardiac Revascularization," NBER Working Papers 18926, National Bureau of Economic Research, Inc.
    5. Grossman, Michael & Goldman, Fred & Nesbitt, Susan W. & Mobilia, Pamela, 1993. "Determinants of interest rates on tax-exempt hospital bonds," Journal of Health Economics, Elsevier, vol. 12(4), pages 385-410, December.
    6. Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, vol. 29(1), pages 87-109, January.
    7. Lindrooth, Richard C. & Lo Sasso, Anthony T. & Bazzoli, Gloria J., 2003. "The effect of urban hospital closure on markets," Journal of Health Economics, Elsevier, vol. 22(5), pages 691-712, September.
    8. Ligon, James A., 1997. "The capital structure of hospitals and reimbursement policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 59-77.
    9. Jill R. Horwitz, 2005. "Does Corporate Ownership Matter? Service Provision in the Hospital Industry," NBER Working Papers 11376, National Bureau of Economic Research, Inc.
    10. Darius Lakdawalla & Tomas Philipson, 1998. "Nonprofit Production and Competition," NBER Working Papers 6377, National Bureau of Economic Research, Inc.
    11. Guerrero, Isabelle & Mossé, Philippe R. & Rogers, Vaughan, 2009. "Hospital investment policy in France: Pathways to efficiency and the efficiency of the pathways," Health Policy, Elsevier, vol. 93(1), pages 35-40, November.
    12. Daniel Friesner & Robert Rosenman, 2002. "A Dynamic Property Rights Theory of the Firm," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 311-333.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:62:y:1989:i:4:p:517-37. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/JB/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.