The Effect of Prior Net Income (Loss) and Zero Earnings Benchmark on Cost Asymmetry - Evidence from Taiwan Hospitals

• Main Authors: Pei-chen Hsieh, 謝佩蓁
• Other Authors: Shu-hua Lee
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/79fnpw

博士 === 國立臺北大學 === 會計學系 === 104 === Anderson, Banker and Janakiramaan (2003) find that the relationship between costs and sales is asymmetric because managers deliberately adjust the resources committed to activities. Banker, Byzalov, Ciftei and Mashruwala (2014) conclude that managers consider prior sales change when they adjust resources committed to activities. Chen, Lu and Sougiannis (2012) show that cost asymmetry positively associated with agency problems. Kama and Weiss (2013) find that earnings targets and managerial incentives affect cost asymmetry. The prices for medical services have been highly regulated since the institution of the Taiwan's National Health Insurance system (NHI) in 1995. There is also greater supervision for the hospital reported loss by the regulatory authorities after the implementation of the NHI. Consequently, Taiwan hospitals may have the incentive to meet or beat the specific zero earnings benchmark. This study investigates the applicability of different cost asymmetry models and address three research objectives. First, using the asymmetric cost behavior model, which is based on the moderating effect of prior sales changes, proposed by Banker et al. (2014), I discuss the asymmetry cost issue by examining cost components of Taiwan hospitals. Second, I further examine this issue by using the asymmetric cost behavior model based on the moderating effect of prior net incomes (losses). Third, I study how the incentive to meet or beat the specific zero earnings benchmark affects the discretionary decisions of costs and its components. Empirical results of the study show that managers consider both prior revenue change and prior net incomes (losses) when they adjust resources committed to activities. More detailed findings are summarized as follows: (1) when managers adjust miscellaneous medical costs, and educational costs and the social service costs within the medical costs, they pay more attention to prior revenue changes than prior net incomes (losses); (2) when managers adjust medical material costs, miscellaneous non-medical expenses, they pay more attention to prior net incomes (losses) than prior revenue changes; (3) when facing prior net losses, managers will cut medical costs, management expenses, miscellaneous non-medical expenses, medical salary costs, medicine costs, medical material costs, miscellaneous medical costs, even if current revenue increases; (4) managers cut more miscellaneous non-medical expenses with the incentive to meet or beat the zero earnings benchmark.