capital structure ownership and capital payment policy the case of hospitals this study examines effects of pertinent features of hospital capital payment policies on hospital capital structure decisions in a one period stochastic value maximization model separate models are developed for for profit and not for profit hospitals hospital debt to assets ratios are analyzed empirically using a cross section of data from the american hospital association although the effect on capital structure of hospital reliance on cost based reimbursement cannot be signed theoretically in both for profit and not for profit cases a higher cost based share leads to higher leverage factors associated with high bankruptcy risk e g earnings volatility cause hospitals to take on less debt the hospital industry exhibits two prominent characteristics that have unique implications for its capital structure first the majority of hospitals are organized as private not for profit nfp institutions since there is no applicable corporate income tax any risk of bankruptcy might imply that the nfp hospital would select an all equity hospital structure yet it is a stylized fact that almost all nfp hospitals have debt obligations at the same time there exists a sizeable minority of hospitals operated by government or as for profit organizations forprofit hospitals are subject to all tax privileges and obligations applicable to forprofit enterprises in other sectors thus the industry provides a laboratory for analysis of the effect of ownership on organizations capital structures a second unique feature of the industry is that almost all hospital revenue is derived from public and private insurers waldo et al 21 at least until very recently insurers in this industry paid hospitals on either a retrospective cost or

did bank distress stifle innovation during the great depression we find a negative relationship between bank distress and the level quality and trajectory of firm level innovation during the great depression particularly for r d firms operating in capital intensive industries however we also show that because a sufficient number of r d intensive firms were located in counties with lower levels of bank distress or were operating in less capital intensive industries the negative effects were mitigated in aggregate although depression era bank distress was associated with the stifling of innovation our results also help to explain why technological development was still robust following one of the largest shocks in the history of the u s banking system

the design of the university system abstract this paper compares the organisation of the university sector under unregulated private provision with the structure which would be chosen by a welfare maximising government it studies a general equilibrium model where students attend university to earn higher incomes in the labour market and universities teach them and carry out research each university chooses its tuition fee to maximise the amount of resources it can devote to research research bestows an externality on society government intervention needs to balance labour market efficiency considerations which would tend to equalise the number of students attending each university with considerations of efficiency on the production side which suggest that the most productive universities should teach more students and carry out more research we find that government concentrates research more that the private market would but less than it would like to do if it had perfect information about the productivity of universities it also allows fewer universities than would operate in a private system

the emergence of market monitoring in japanese banks evidence from the subordinated debt market abstract this paper uses a unique data set on the spreads of subordinated debts issued by japanese banks to investigate the presence of market monitoring the results show that subordinated debt investors punished weak banks by requiring higher interest rates moreover i find that the spreads and the sensitivity of spreads to moody s bank ratings both increased dramatically after the japanese government allowed a large city bank hokkaido takushoku bank to fail and passed the financial reform act and the rapid revitalization act in the late 1990s these results suggest that the decline of conjectural guarantee led to the emergence of market monitoring in addition i find the relationship between spreads and accounting measures of bank risk to be quite fragile

a liquidity based model of security design we consider the problem of the design and sale of a security backed by specified assets given access to higher return investments the issuer has an incentive to raise capital by securitizing part of these assets at the time the security is issued the issuer s or underwriter s private information regarding the payoff of the security may cause illiquidity in the form of a downward sloping demand curve for the security the severity of this illiquidity depends upon the sensitivity of the value of the issued security to the issuer s private information thus the security design problem involves a tradeoff between the retention cost of holding cash flows not included in the security design and the liquidity cost of including the cash flows and making the security design more sensitive to the issuer s private information we characterize the optimal security design in several cases we also demonstrate circumstances under which standard debt is optimal and show that the riskiness of the debt is increasing in the issuer s retention costs for assets

limited liability and incentive contracting with ex ante action choices abstract this article examines a principal agent model of financial contracting in which a risk neutral entrepreneur agent makes an unobservable ex ante effort choice while employing the investment funds of a risk neutral investor principal the key innovation is that the investment contract is subject to statutory liability limits given these liability limits two settings are considered one in which the investor payoff function is also constrained to be monotonically nondecreasing in firm profit and another in which no such monotonic contract constraint is imposed in the former case a standard debt contract is shown to emerge and a first best effort choice is not achieved in the latter setting the optimum is characterized by a live or die payoff function and a first best effort level may or may not be realized

the supply of charity services by nonprofit hospitals motives and market structure this article studies provision of charity care by private nonprofit hospitals we demonstrate that in the absence of large positive income effects on charity care supply convex preferences for the nonprofit hospital imply crowding out by other private or government hospitals extending our model to include impure altruism rivalry provides a possible explanation for the previously reported empirical result that both crowding out and income effects on indigent care supply are often weak or insignificant empirical analysis of data for hospitals in maryland provides evidence of rivalry on the supply of charity care

cut to the bone hospital takeovers and nurse employment contracts the authors examine changes in the wages employment and effort of nurses in california hospitals following takeovers by large chains in the 1990s the market for nurses has been described as a classic monopsony so that one might expect increases in firm market power to be associated with declines in wages however a basic contracting model predicts effects on effort rather than on wages which is what this analysis finds nurses experienced few declines in wages following takeovers but did see increases in the number of patients per nurse the measure of effort used here the authors show that their results are also consistent with an extended version of the monopsony model that considers effort and allows for revenue shifts following a takeover finally they find that these changes were similar in the largest for profit and non profit chains suggesting that market forces are more important than institutional form

hospital ownership and performance this study compares the performance of three ownership forms of hospitals for profit private nonprofit and public further classified according to whether or not the hospital is run by a hospital chain data come from a 1979 national survey of u s hospitals the authors find that hospital cost is quite similar among alternative ownership forms as is profitability the results do not provide much empirical support for standard property rights theory several reasons are suggested why this may be so

measuring hospital performance a non parametric approach abstract in this paper a technique for assessing the relative performance of firms is introduced and applied to a sample of hospitals in california hospitals are compared on the basis of their relative technical efficiency the reference technology is constructed from observed outputs and inputs including physicians using programming techniques and efficiency is assessed relative to the frontier of the technology using measures similar to those suggested by farrell the technique used here imposes no prespecified functional form allows for multiple outputs and inputs allowing for differences in case mix and yields information on the productive performance of individual hospitals this technique can also be used to determine whether different types of hospitals use different technologies our results although illustrative rather than definitive suggest that ownership affects efficiency as measured here public and nfp hospitals have different best practice frontiers and public hospitals appear to use relatively fewer resources these results could reflect differences in quality of care by ownership

strategic liquidity supply and security design we study how securities and issuance mechanisms can be designed to mitigate the adverse impact of market imperfections on liquidity in our model asset owners seek to obtain liquidity by selling claims contingent on privately observed future cash flows liquidity suppliers can be competitive or strategic in the optimal trading mechanism associated to an arbitrary given security issuers with low cash flows sell their entire holdings of the security while issuers with high cash flows are typically excluded from trade by designing the security optimally issuers can avoid exclusion altogether we show that the optimal security is debt because of its low informational sensitivity debt mitigates the adverse selection problem furthermore by pooling all issuers with high cash flows debt also reduces the ability of a monopolistic liquidity supplier to exclude them from trade in order to better extract rents from issuers with lower cash flows

efficiency analysis for exogenously fixed inputs and outputs we evaluate by means of mathematical programming formulations the relative technical and scale efficiencies of decision making units dmus when some of the inputs or outputs are exogenously fixed and beyond the discretionary control of dmu managers this approach further develops the work on efficiency evaluation and on estimation of efficient production frontiers known as data envelopment analysis dea we also employ the model to provide efficient input and output targets for dmu managers in a way that specifically accounts for the fixed nature of some of the inputs or outputs we illustrate the approach using real data for a network of fast food restaurants

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

corruption in public service delivery an experimental analysis abstract to improve our understanding of corruption in service delivery we use a newly designed game that allows us to investigate the effects of the institutional environment on the behavior of service providers and their monitors we focus on the effect of four different factors whether monitors are accountable to the service recipients the degree of observability of service providers effort the providers wages and the providers professional norms in accordance with theory we find that service providers perform better when monitors are elected by service recipients and when their effort is more easily observed however there is only weak evidence that service providers perform better when paid more monitors are more vigilant when elected and when service providers are paid more playing the game with ethiopian nursing students we also find that those with greater exposure to the ethiopian public health sector perform less well either as provider or as monitor when the experiment is framed as a public health provision scenario suggesting that experience and norms affect behavior

measuring efficiency in education an analysis of different approaches for incorporating non discretionary inputs measuring efficiency in the education sector is a highly complex task one of the reasons is that the main resource of schools the type of students they have lie outside of their control which means that it must be treated differently to other factors in analysis this study examines the different options available in the literature for incorporating non controllable inputs in a data envelopment analysis in order to determine the most appropriate model for evaluating schools our empirical study presents the results obtained using the model proposed by fried et al 1999 though we use bootstrap techniques to avoid problems of bias in the estimations

money market integration we use transaction level data and detailed modeling of the high frequency behavior of federal funds eurodollar spreads to provide evidence of strong integration of the u s markets for federal funds and eurodollars the two core components of the dollar money market our evidence of negligible federal funds eurodollar premia contrasts with previous findings of large and predictable premia which have been interpreted as evidence of segmentation between the markets for federal funds and eurodollars our results however are consistent with possible persistent segmentation within the global eurodollar market we document several patterns in the behavior of federal funds eurodollar spreads including liquidity effects from trading volume to yield spreads volatility

a micro economic perspective on manager selection in nonprofit organizations abstract this paper recognizes that individuals working in the nonprofit sector can have different motives and investigates which type of manager nonprofit organizations should best employ it first considers a situation in which the manager is allowed to attract only one employee and later extends the analysis to a situation in which up to three employees can be employed analyses mark the importance of a strong commitment to the organization s mission and caution for both a strong self interest and a strong devotion to the well being of the clients managers with a moderate interest in their own objectives can nevertheless be valuable to the organization the paper also marks why managers should avoid similar to me biases in the selection process and investigates the effects of an increased work pressure on the behavior of the managers and on the attainment of the organizational goals

enter at your own risk hmo participation and enrollment in the medicare risk market we examine hmo participation and enrollment in the medicare risk market for the years 1990 to 1995 we develop a profit maximization model of hmo behavior which explicitly considers potential linkages between an hmo s production decision in the commercial enrollee market and its participation and production decisions in the medicare risk market our results suggest that the payment rate is a primary determinant of hmo participation while the price of a supplemental medicare insurance policy positively affects hmo medicare enrollment we also find empirical support for the existence of complementarities in the joint production of an hmo s commercial and medicare products

optimal prices and costs for hospitals with excess bed capacity this paper analyses theoretically and empirically issues in optimal pricing with excess hospital capacity and then applies the analysis to the issue as to whether medicare and medicaid payments cover the marginal costs of treating patients of each type the primary innovation of this paper lies in incorporating appropriate theoretical measures of hospital excess capacity to a multiproduct empirical hospital cost function and in showing how proper measures of marginal cost can be applied to the examples of medicare and medicaid reimbursement in california with a standard translog specification that ignores hospital excess capacity the estimated marginal costs of medicare and medicaid patients are higher than the reimbursement however correctly incorporating excess capacity into our model leads to considerably lower estimates of short run marginal costs suggesting that medicare hospital reimbursement is more than adequate in the short run we also develop a third marginal cost concept that of what l

optimal security design how should new securities be designed traditional theories have little to say on this the literature on capital structure and general equilibrium theories with incomplete markets take the securities firms issue as exogenous this paper explicitly incorporates the transaction costs of issuing securities and develops a model where the instruments that are traded are chosen optimally and the economy s market structure is endogenous among other things it is shown that the firm s income stream should be split so that in every state all payoffs are allocated to the security held by the group that values them most this abstract was borrowed from another version of this item

non profit cost adjusting with quality as a private good nonprofit firms that produce multiple outputs may lower service intensity for one patient group in response to lower reimbursements for another group this is termed cost adjusting behaviour cost adjusting implies a serious welfare transfer the results of this analysis suggest that the potential for this welfare transfer exists however the ability of a firm to exploit this welfare transfer depends largely on the demand conditions present in the market an empirical analysis finds evidence that nonprofit hospitals in washington state do practise cost adjusting

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

market discipline and deposit insurance reform in japan abstract on april 1 2002 the japanese government lifted a blanket guarantee of all deposits and began limiting the coverage of time deposits this paper uses this deposit insurance reform as a natural experiment to investigate the relationship between deposit insurance coverage and market discipline i find that the reform raised the sensitivity of interest rates on deposits and that of deposit quantity to default risk in addition the interest rate differentials between partially insured large time deposits and fully insured ordinary deposits increased for risky banks these results suggest that the deposit insurance reform enhanced market discipline in japan i also find however that too big to fail tbtf policy became a more important determinant of interest rates and deposit allocation after the reform thereby partially offsetting the positive effects of the deposit insurance reform on overall market discipline

the effects of for profit status and system membership on the financial performance of hospitals this research examines whether for profit status or system membership is significantly related to the financial performance of hospitals panel data containing 573 observations of florida hospitals for 1984 through 1987 are used in a fixed effects regression model the results indicate that it is system membership rather than forprofit status that is significantly related to better financial performance for profit status is unrelated to overall financial performance system hospitals have higher revenues per admission but not higher expenditures per admission than independent hospitals the findings are consistent with the hypothesis that expanding hospital systems target locations and services that are potentially profitable

balancing incentives in the compensation contracts of nonprofit hospital ceos abstract given the considerable insight into corporate governance achieved through studies of executive compensation in proprietary firms it is surprising that executive contracting in nonprofit organizations remains largely unexplored in this paper we use the multitask principal agent model of holmstrom and milgrom the journal of law economics and organization 7 1991 suppl 24 to argue that nonprofit hospitals represent an optimal response to information asymmetries between managers and boards for a board with multidimensional objectives the agency problem is getting top executives to distribute their efforts across all dimensions of the hospital s mission the nonprofit form is preferred because the absence of high powered incentives such as share ownership reduces executives incentives to place undue emphasis on improving financial performance at the expense of important but less observable tasks using newly available compensation data we test the model by comparing the conditional distributions of earnings for industrial and nonprofit hospital ceos in ontario our best estimates are that ceos in publicly traded firms earn twice as much on average as those in similarly sized nonprofit hospitals but bear roughly eight times the income variance estimates of the associated degree of risk aversion are well within conventional bounds and are consistent with the trade off between insurance and incentives predicted by the theory

municipal bond pricing and the new york city fiscal crisis this paper s findings suggests that the new york city fiscal crisis by itself did not lead to a fundamental change in risk perceptions of investors resulting in higher interest rates in the municipal bond market the monthly prediction errors generated by time series tests were relatively small and none were statistically significant only the signs on the prediction errors for june july and august were consistent with a new york city effect thus if the new york city default had an impact on aggregate interest rates it was at most small and of short duration a great deal of controversy has arisen in recent years over the impact of the new york city default upon the municipal bond market during 1975 municipal borrowing costs rose to historically high levels with most issues carrying their highest interest cost during the summer of 1975 it was during this period that new york city experienced the worst of its 15 year history of financial problems while most observers argue that the problems of new york city represent a special case of fiscal mismanagement many conclude that the high market rates of interest in the municipal bond market were caused by the new york city default research by forbes and peterson 3 and gramlich 5 supports the latter contention in addition others contend that the impact of the default was not just temporary but was felt long after 1975 8 these contentions if true have significant policy implications not only do they suggest that all municipalities suffered immediate as well as long term higher interest cost due to the fiscal irresponsibility of new york city but they are important arguments for the provision of federal aid to prevent the failures of other large municipalities or corporate entities 1 the purpose of this paper is to examine whether the new york city default by itself caused risk perceptions of investors to change resulting in higher interest rates to other municipal borrowers the hypothesis is tested by applying a random coefficients model to aggregate time series interest rate data the major finding of the study is that there is little evidence consistent with the hypothesis that the new york city crisis had a fundamental or long lasting impact on municipal borrowing costs this paper is organized as follows section i describes how the new york city fiscal crisis may have raised municipal borrowing costs

measuring hospital efficiency with frontier cost functions this paper uses a stochastic frontier multiproduct cost function to derive hospital specific measures of inefficiency the cost function includes direct measures of illness severity output quality and patient outcomes to reduce the likelihood that the inefficiency estimates are capturing unmeasured differences in hospital outputs models are estimated using data from the aha annual survey medicare hospital cost reports and medpar we explicitly test the assumption of output endogeneity and reject it in this application we conclude that inefficiency accounts for 13 6 percent of total hospital costs this estimate is robust with respect to model specification and approaches to pooling data across distinct groups of hospitals

the effects of asset specificity on maintenance financial performance an empirical application of transaction cost theory to the medical device maintenance field abstract this study uses multivariate regression analysis to examine the effects of asset specificity on the financial performance of both external and internal governance structures for medical device maintenance and investigates how the financial performance of external governance structures differs depending on whether a hospital is private or public the hypotheses were tested using information on 764 medical devices and 62 maintenance service providers resulting in 1403 maintenance transactions as such our data sample is significantly larger than those used in previous studies in this area the results empirically support our core theoretical argument that governance financial performance is influenced by assets specificity

credit derivatives premium as a new japan premium at the height of the japanese banking crisis of 199798 a popular indicator of weakness was the so called japan premium that is the premium in the interest rate charged to japanese banks in the interbank market the internationally active japanese banks had to pay a premium in borrowing us dollars and to a much lesser extent japanese yen from western banks the japan premium was considered to reflect western banks skepticism on opaque accounting and supervision ihe japan premium disappeared after the second capital injection to major banks in march 1999 l by the end of 2001 the vulnerability of japanese banks became obvious due to low earnings newly emerged nonperforming loans and deflation the core capital tier i capital was depleted and was supplemented only by deferred tax credit which has no liquidation value however it was noted by banking experts and researchers that the japan premium did not reappear it was a puzzle why the premium was not demanded this time the focus of this letter is to explain why the japan premium apparently disappeared and to report on an alternative indicator for japanese bank vulnerability that would replace the japan premium we will assert that the japan premium the

pricing behavior of non profit agencies the case of blood products abstract in this study we examine the pricing behavior of a non profit agency the american national red cross blood service units two alternative hypotheses are presented one in which the agency maximizes profits and one in which output is maximized subject to a breakeven constraint following a general approach developed by eckstein and fromm pricing equations for separate blood products are applied to cross sectional data from red cross blood centers to determine the impact of demand cost competition and subsidy variables the impact of these variables in particular the impact of the fixed subsidy on price is shown to be consistent with the output maximizing model

hospital efficiency and indigent care 1990 hospital efficiency and indigent care applied economics vol 22 no 11 pp 1597 1610

reimbursing health plans and health providers efficiency in production versus selection the tradeoff between an insurer s or medical provider s incentives to select good risks and to produce efficiently is governed by the supply price analog to the demand price tradeoff between moral hazard and risk aversion under a variety of models the optimum supply price is a mixture of capitation and fee for service payments empirical literature shows that pure capitation payment leaves strong incentives for selection that are acted upon the presence of contracting costs in a rothschild stiglitz model means a limited pooling equilibrium can exist and that poor risks will not be at their preferred outcome

financial intermediaries and liquidity creation trading losses associated with information asymmetries can be mitigated by designing securities which split the cash flows of underlying assets these securities which can arise endogenously have values that do not depend on the information known only to informed agents bank debt deposits is an example of this type of liquid security which protect relatively uninformed agents and we provide a rationale for deposit insurance in this content high grade corporate debt and government bonds are other examples implying that a money market mutual fund based payments system may be an alternative to one based on insured bank deposits

the changing effects of competition on non profit and for profit hospital pricing behavior abstract has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payors this paper uses time series cross sectional methods on california hospital discharge data from 1986 1994 to show the association of hospital prices with measures of market concentration changed steadily over this period with prices now higher in less competitive areas even for non profit hospitals regression results are used to simulate the price impact of hypothetical hospital mergers

the impact of the new york city fiscal crisis on the interest cost of new issue municipal bonds the default of a major corporation or municipality generates debate over the impact these failures have on the borrowing cost of other issuers theory suggests that in efficient markets individual failures by themselves should not increase the level of interest rates in a market unless the default provides unanticipated information about other issuers the default of new york city in the summer of 1975 was believed by many to have provided information that increased the perceived risk of investors and consequently increased new issue borrowing costs in the municipal bond market empirical research by forbes and peterson 2 and gramlich 3 supports this contention reporting that borrowers paid as much as 119 basis points more because of the new york city crisis a study by hoffland 6 suggests that the impact of the default was not just temporary but was felt long after 1975 though less scientific others note that during 1975 municipal borrowing costs rose to record high levels with most issues carrying their interest cost during the summer of 1975

political authority expertise and government bureaucracies by applying the revelation principle we focus on how a sponsor who possesses political authority could minimise the efficiency losses when bureaucrats are experts that is when they control information about the true costs of public services production our results come in striking contrast to those in the literature on bureaucracies and public procurement in a two types setting and in the absence of monitoring and control mechanisms we find that the agency is productively efficient under certain conditions the agency is also allocatively efficient while under others the low cost bureau oversupplies and the high cost agency undersupplies its output

market specific and currency specific risk during the global financial crisis evidence from the interbank markets in tokyo and london abstract this paper investigates how international money markets reflected credit and liquidity risk during the global financial crisis after matching the currency denomination we examine how the tokyo interbank offered rate tibor was synchronized with the london interbank offered rate libor we find remarkably asymmetric responses in market specific and currency specific risk during the crisis the regression results suggest that market specific credit risk increased the difference across markets whereas liquidity risk caused the difference across currency denominations they also support the view that liquidity shortage of the us dollar occurred in international money markets during the crisis coordinated central bank liquidity provisions were useful in reducing the liquidity shortage of the us dollar but their effectiveness was asymmetric across markets

short selling and price discovery in corporate bonds we show short selling in corporate bonds forecasts future bond returns short selling predicts bond returns where private information is more likely in high yield bonds particularly after lehman brothers collapse of 2008 short selling predicts returns following both high and low past bond returns this together with short selling increasing following past buying order imbalances suggests short sellers trade against price pressures as well as trade on information short selling predicts bond returns both in the individual bonds that are shorted and in other bonds by the same issuer past stock returns and short selling in stocks predict bond returns but do not eliminate bond short selling predicting bond returns bond short selling does not predict the issuer s stock returns these results show bond short sellers contribute to efficient bond prices and that short sellers information flows from stocks to bonds but not from bonds to stocks

multi product costs and standby capacity derived from queuing theory the case of belgian hospitals empirical hospital cost function studies can be divided into two categories studies estimating traditional multi product cost functions and studies including demand uncertainty assuming that hospitals provide standby capacity to cope with uncertain demand and stressing that the relationship between the uncertain demand excess capacity and costs should be investigated most studies include the inverse of the occupancy rate in a relatively basic cost function the first contribution of this paper is to incorporate an indicator of reserve capacity into a genuine multi product cost function the second contribution is to propose an alternative indicator to proxy the reserve margin the often used occupancy rate has an important shortcoming the same occupancy rate can hide different turnaway probabilities and waiting times obscuring the true degree of reservation quality since turnaway probabilities and waiting times are typical queuing theory indicators an indicator for average waiting time derived

assessing school efficiency in portugal using fdh and bootstrapping this study explores a new data set that contains information both on inputs and outputs for a sample of portuguese secondary schools an fdh reference technology is used to determine radial technical efficiency scores and slacks although it is known that there is no reason to assume convexity in the study of education efficiency frontiers this is the first study ever to use fdh at the school level effectively relaxing the convexity assumption a two stage approach is used whereby the significant environmental variables that explain fdh efficiency scores and slacks are identified for the purpose of statistical inference the first application of the bootstrapping algorithms suggested by simar and wilson 2003 is conducted the study concludes that the unemployment rate access to health care services adult education and living infrastructures are determinants of school efficiency the differences between the coast and the interior of portugal seem to be more relevant as far as school efficiency is

competition among hospitals the traditional view of hospital competition has posited that hospitals compete primarily along quality dimensions in the form of fancy equipment to attract admitting physicians and pleasant surroundings to entice patients price competition among hospitals is thought to be non existent this paper estimates the effects of various hospital market characteristics on hospital prices and expenses in an attempt to determine the form of hospital competition the results suggest that both price and quality competition are greater in markets that are less concentrated although the net effect of the two on prices is insignificant it appears therefore that despite important distortions hospital markets are not immune to standard competitive forces

quality and outside capacity in the provision of health services abstract this paper studies the effects of non contractibility of investment on the choices made by a health authority and a hospital which supplies a specific service non contractibility determines inefficiencies compared with any pareto efficient outcome the quality of the service chosen by the hospital is too low and the health authority relies too much on outside providers

efficiency of hospitals in germany a dea bootstrap approach various attempts to assess the performance of german hospitals have generated a wide range of estimates regarding their efficiency these attempts were based on different often rather small data sets consisting of heterogeneous hospitals the techniques applied range from simple benchmarking approaches to studies which employ data envelopment analysis dea some studies report dramatic differences in efficiency and propose savings potentials of 50 others find an average efficiency in excess of 95 and characterize almost 75 of their observations as fully efficient this study presents results for two datasets representative of two segments of the german hospital system these segments comprise all hospitals that have one internal medicine and one surgery department the hospitals are located in the old federal states of germany none of the hospitals provides tertiary care dea can be applied because all hospitals offer a comparable quality and range of services the results were estimated with a d

comparing french and us hospital technologies a directional input distance function approach french and us hospital technologies are compared using directional input distance functions the aggregation properties of the directional distance function allow comparison of hospital industry level performance as well as standard firm level performance with regard to productive efficiency in addition the underlying constituents of efficiency in the short run congestion and technical inefficiency and in the long run scale inefficiency are analysed by decomposing the overall measure by virtue of using the directional distance function it is also possible to obtain an estimate of a lower bound on allocative inefficiency it is found that french and us hospitals use quite different technologies long run scale inefficiencies cause most of the french hospitals inefficiency while short run technical inefficiency is the main source of overall productive inefficiency in the us hospitals

political influence and declarations of bank insolvency in japan this paper investigates how politics affects bank supervision by examining determinants of bank failures in japan during 1999 2002 a period during which bank regulators were called upon to resolve insolvent banks in preparation for the lifting of a blanket deposit guarantee the empirical results suggest that japan s bank regulators had tendency to delay declarations of insolvency in prefectures that supported senior politicians of the ruling liberal democratic party ldp this result which is robust to a host of bank level and prefecture level controls suggests that bank supervision is prone to political influence that delays efficient resolution of insolvency

behavioural differences among hospitals it is ownership or location by about 1988 the consensus among leading health economists was that no meaningful differences existed among hospitals of differences owernership form and this position was embraced by the antitrust division of the us department of justice but behavioural differences among hospitals of different among hospitals of different owernership has continued to be a matter of both academic and judicial interest recent empirical studies have concluded that real differences do exist while many earlier studies reached the opposite conclusion this contradiction in finding over time as competition intensified is exactly opposite to what expense preference theory would predict we examine this apparent paradox using a very general test of behavioural differences by hospital ownership we find that the omission of location specific variables can lead to biased estimates of ownership effects and that no significant behavioural differences exist among private california hospitals in 1986 90 when this source of o

nonprofit organizations revised theory and new evidence it is apparent that comprehensive analysis requires at least some application of elementary axioms from the economics of politics or public choice one of these implies that because of asymmetric costs of political participation some suppliers of goods and services usually do better for themselves out of lobbying and organization than do others moreover for the same reason dispersed consumers would appear to do worst of all legislation and policy on nonprofit organization seems to be one of many examples of this phenomenon in this case however the supply side lobbyists are aided by an ancient and deep seated popular prejudice against profit making the man in the street has apparently not yet fully grasped the point that so long as competition is possible the profit inducement acts as a continued incentive to minimize costs constantly and indiscriminately to condone pejorative language against profits is to create a climate that results in legislation giving unprecedented new profit opportunities via not for profit organizations and such increased rewards can result in social harm rather than social gain granted there may be cases that justify nonprofits in some circumstances preston 1988 the fact remains that the costs of separating and monitoring these cases at least at federal level would appear to be overwhelming the nonprofit system that is usually advocated calls for a federal general tax exemption yet the value of this advantage is the same to all nonprofit firms whereas we need to know the extent of the particular social benefits generated in each particular case so as to give tailor made government assistance and since in very many instances the social benefits are negative the government s shotgun approach appears highly questionable

meteor showers or heat waves heteroskedastic intra daily volatility in the foreign exchange market this paper seeks to explain the causes of volatility clustering in exchange rates careful examination of intra daily exchange rates provides a test of two hypotheses heat waves and meteor showers the heat wave hypothesis is that the volatility has only country specific autocorrelation alternatively the meteor shower is a phenomenon of intra daily volatility spillovers from one market to the next using the garch model to specify the heteroskedasticity across intra daily market segments we find that the empirical evidence is generally against the null hypothesis of the heat wave using a volatility type of vector autoregression we examine the impact of news in one market on the time path of per hour volatility in other markets

practice what you preach microfinance business models and operational efficiency the microfinance sector has room for pure for profit microfinance institutions mfis non profit organizations and social for profit firms that aim to pursue a double bottom line depending on their business model these institutions target different types of borrowers change the size of their loans and adjust their loan pricing we introduce a simple approach that accommodates a wide range of business models and allows us to estimate the operational efficiency of mfis our empirical results show that mfis with a high depth of outreach are most efficient resulting in higher levels of outreach and profits for the same input mix

unnatural selection perverse incentives and the misallocation of credit in japan we examine the misallocation of credit in japan associated with the perverse incentives faced by banks to provide additional credit to the weakest firms firms are more likely to receive additional bank credit if they arein poor financial condition because troubled japanese banks have an incentive to allocate credit to severely impaired borrowers in order to avoid the realization of losses on their own balance sheets this evergreening behavior is more prevalent among banks that have reported capital ratios close to the required minimum and is compounded by the incentives arising from extensive corporate affiliations

profit variability in for profit and not for profit hospitals this paper proposes two tests of the hypothesis that not for profit hospitals nfps behave differently than for profit hospitals the profit variability test states that the profits of an nfp will be less variable over time than profits of a for profit hospital if the nfp maximizes utility subject to a profit constraint the second test examines whether nfp profits respond less to change in exogenous factors such as medicare reimbursement rates than profits of for profit hospitals both tests performed on panel data from 1983 to 1988 support the hypothesis that nfps behave differently than for profit hospitals

secondary market liquidity and security design theory and evidence from abs markets we develop and empirically test a theory of optimal security design under adverse selection accounting for strategic trading by uninformed investors who will liquidate a security in secondary markets only if their idiosyncratic carrying costs exceed the security s expected trading loss such investors demand primary market discounts equaling expected carrying costs borne plus trading losses incurred issuers minimize the total illiquidity discount by splitting cash flow into tranched debt claims with liquidity predicted to increase with seniority while the optimal number of tranches increases with underlying cash flow risk empirical tests confirm our model predictions

does the japanese stock market price bank risk evidence from financial firm failures the ability of the japanese stock market to appropriately price the riskiness of japanese financial firms has been frequently questioned particularly in light of japan s widespread financial distress in recent years and poor disclosure requirements this paper examines the response in equity returns of japanese banks to the failure of four commercial banks and two securities firms between 1995 and 1998 using event study methodology the analysis finds that share prices of surviving banks on the whole responded unfavorably to the failures and that financially weaker survivors were more adversely affected this suggests that despite the distress and alleged opaqueness bank shareholders were able to use available indicators of financial condition both to incorporate new information quickly into stock prices and to differentiate among banks

from turmoil to crisis dislocations in the fx swap market before and after the failure of lehman brothers abstract this paper investigates dislocations in the foreign exchange fx swap market between the us dollar and three major european currencies after the failure of lehman brothers in september 2008 deviations from covered interest parity cip were negatively associated with the creditworthiness of us financial institutions as well as that of european institutions consistent with the deepening of a dollar liquidity problem into a global phenomenon us dollar term funding auctions by the ecb snb and boe as well as the us federal reserve commitment to provide unlimited dollar swap lines are found to have ameliorated the fx swap market dislocations

frontier estimation how useful a tool for health economics the journal is pleased to publish in this issue three papers that apply frontier estimation techniques to hospitals and nursing homes together with an exchange over the usefulness of those techniques in the health care context the papers represent the current state of the art with respect to applications of frontier estimation in health care because of the growing popularity of the technique no doubt in part from its availability in standard software packages it seems useful to take this opportunity to appraise its usefulness one might begin by asking usefulness for what assuming one could define a frontier with certainty how would one use such knowledge a straightforward application in health care appears to be to reimbursement because both data envelopment analysis dea and stochastic frontier estimation specify the least cost mix of inputs for a given output both methods can in principle be used to determine whether a given firm hospital or nursing home is efficient and if the answer to that question is no the magnitude of any inefficiency it is not a large step from that information to the notion that a regulator should reduce the firm s budget by the amount of the measured inefficiency indeed vitaliano and toren mention the boren amendment s requirement that the medicaid program reimburse hospitals and nursing homes at the cost incurred by an efficiently operated

an international comparison of hospital efficiency does institutional environment matter the consensus among many health economists is that no meaningful performance differences exist among for profit and non profit hospitals in the us but this topic has continued to be a matter of academic judicial and public policy interest a similar debate has ensued internationally regarding the potential efficiency gains from privatization of public enterprises in this paper we examine empirical evidence from the public highly regulated norwegian hospital sector and the private highly competitive and unregulated california hospital sector to ascertain whether institutional environment and level of market competition significantly affect the degree of productive efficiency in hospitals we compare and discuss the productive efficiency of four similar sets of hospitals operating in different institutional and competitive environments the four samples are carefully matched in the dimensions of sample size hospital size and average lengths of stay heterogeneity in output definition is used to co

a yen is not a yen tibor libor and the determinants of the japan premium pricing in the euroyen market is based on libor the london interbank offered rate set at 11 00am london time or tibor the tokyo interbank offered rate set at 11 00am tokyo time the changing tibor libor spread reflects the credit risk associated with japanese banks or the japan premium the spread is modeled as a function of determinants of bank default and firm value systematic variation in the spread can be explained by interest rate and stock price effects along with public information flows of good and bad news regarding japanese banking with a separate role for bank credit downgrades and upgrades

determinants of the japan premium actions speak louder than words abstract since august 1995 japanese banks have had to pay a premium on eurodollar and euroyen interbank loans relative to their u s and u k competitors this so called japan premium provides a market indicator of investor anxiety about the ability of japanese banks to repay loans we examine the determinants of the japan premium and find that government announcements not associated with concrete actions had little impact on the other hand announcements of concrete actions by the japanese government such as injections of funds into the banking system tended to have an effect on the size of the japan premium

hospital mergers who merges with whom merger pairings are categorized based on the ownership status teaching status hospital size caseload severity and geographical distance of merging hospitals to determine the types of hospitals that tend to merge with each other the results show that mergers between two non teaching nonprofit or for profit hospitals occur more often but that only ownership status not teaching status affects the propensity to merge after controlling for other merger pair characteristics this paper also finds that hospitals are more likely to merge with a partner of similar size and close geographical proximity but not necessarily the closest candidate however ownership status not distance between hospitals is the dominant determinant of merger pairs

sensitivity analysis for dea models an empirical example using public vs nfp hospitals abstract the research presented here applies the data envelopment analysis dea to a sample of public government owned and not for profit hospitals operating in michigan in 1982 the focus of this research is twofold first assessing the relative efficiency between these two ownership types using the dea rather than cost or profit functions can add insights into the production practices of these two ownership forms of hospitals second testing the sensitivity of the dea will add credence to this approach and resulting measures ten different specifications of the dea are employed to test the sensitivity of the model

estimating an hedonic translog cost function for the home health care industry medicare home health care plays an important role in providing cost effective care for the chronically ill and elderly long seen as a cost effective substitute for nursing home care home care has become even more important with expenditures increasing by 31 4 from 1990 to 1996 the purpose of this paper is to provide a short run cost analysis of a sample of home health care providers to gain insight into the efficient provision of home health care services this paper is a significant improvement over previous studies in that it uses a nationwide database to more accurately represent the multiproduct nature of the industry and uses an hedonic translog cost estimation with desirable economic properties

hospital profits the effects of reimbursement policies this paper provides a theoretical and empirical analysis of the effect of cost based reimbursement cbr on hospital costs and charges it takes issue with previous analyses which have treated cbr as paying economic costs plus a mark up and have concluded that the mark up is too small to significantly distort hospital decision making the basic thesis here is that if reimbursement is based on costs accounting costs become a price to cost paying patients and will be optimized to maximize revenue a hospital serving both cost and charge paying private patients can set two price schedules accounting profits ratio of charges to costs are not a measure of economic profit but of relative prices to these two groups of patients in the absence of constraints from regulation or patient co payment the optimum level of accounting costs would be infinite in practice the medicare reimbursement formula links allowable costs to charges received from charge paying patients this formula creates incentives for the hospital to raise charges above the single price profit maximizing monopoly level this inflationary effect of the medicare formula does not presuppose that medicare pays less than full cost the empirical analysis of hospital laboratory costs and charges generally supports the predictions for other departments the conclusions are consistent but more tentative because of data limitations overall evidence suggests minimal cross subsidy between cost and charge paying patients comparisons of cost and charge levels in for profit voluntary non profit and government hospitals are presented but it is emphasized that inferences about relative efficiency and profitability cannot be drawn from accounting data given the incentives created by cbr

information production dilution costs and optimal security design abstract we investigate the problem of a firm wishing to finance a project by issuing securities under asymmetric information we find that when outside investors can produce noisy information on the firm s quality the degree of information asymmetry resulting in equilibrium is endogenous and depends on the information sensitivity of the security issued thus in contrast to the prediction of the pecking order theory see e g myers and majluf j financial econom 13 1984 187 a security with low sensitivity to private information such as debt does not always dominate one with high information sensitivity such as equity a firm s preference for equity rather than debt depends on the costs of information production the precision of the information production technology and the extent of the information asymmetry we also study the optimal security design problem and find that depending on the cost and precision of the information production technology risky debt or a composite security with a convex payoff emerges as optimal securities

market share and the illusion of power can blue cross force hospitals to discount researchers in health care financing have claimed that large private insurers like blue cross frequently exercise monopsony power to obtain discounts from normal hospital charges they claim that the monopsony power derives from a large blue cross share of a given hospital cost shifting whereby hospitals offset the discount by raising charges to less powerful customers this paper re examines both theoretically and empirically the conditions necessary for a private insurer to extract discounts from a hospital we demonstrate that the theoretical conditions necessary for blue cross to force a discount do not exist in the indiana market using revenue data from 110 indiana hospitals we reject the traditional claim that blue cross pays less than other insurers as a function of market share

optimal design of securities under asymmetric information a firm must decide what security to sell to raise external capital to finance a profitable investment opportunity there is ex ante asymmetry of information regarding the probability distribution of cash flow generated by the investment in this setting we derive necessary and sufficient conditions for a security to be optimal uniquely optimal that is for pooling at this security to be an the unique equilibrium outcome using these conditions we show that the debt contract is uniquely optimal if and only if cash flows are ordered by strict conditional stochastic dominance finally we derive an equivalence relationship between optimal security designs and designs that minimize mispricing