Leslie G Eldenburg

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• Eldenburg, L. G., Gaertner, F., & Goodman, T. (2015). The Influence of Ownership and Compensation Practices on Charitable Activities. Contemporary Accounting Research.
• Eldenburg, L. G., Gunny, K. A., Hee, K. W., & Soderstrom, N. (2011). Earnings management using real activities: Evidence from nonprofit hospitals. Accounting Review, 86(5), 1605-1630.
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  Abstract: We extend the literature on earnings management through real operating decisions by providing insight into the types of expenditures (core versus noncore and operating versus non-operating activities) affected by earnings management. We partition a sample of California nonprofit hospitals based on their earnings management incentives. We find that expenditures on non-operating and nonrevenue- generating activities appear to decrease in hospitals with incentives to engage in such behavior, while core patient care activities remain unchanged. We also find evidence of earnings management in non-core operational expenses. Second, we analyze real earnings management related to pay-for-performance incentives and find that hospitals with stronger performance incentives exhibit a significant incremental decrease in expenditures. Finally, we examine two different kinds of behavior to discriminate between earnings management and good operational decisions and provide weak evidence to support opportunism rather than good management. Together, these results provide evidence of the use of real operating decisions to manage earnings.
• Balakrishnan, R., Eldenburg, L., Krishnan, R., & Soderstrom, N. (2010). The Influence of Institutional Constraints on Outsourcing. Journal of Accounting Research, 48(4), 767-794.
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  Abstract: Drawing on transaction cost economics and institutional theory we argue that the effects of institutional constraints on the transaction costs of outsourcing vary systematically with the type of service outsourced and the ownership structure of the outsourcing firm. Using data from hospitals, we demonstrate that these effects lead to a higher extent of outsourcing of nonclinical compared to clinical services, and larger outsourcing response of nonclinical services to cost pressures from managed care. Further, the effects of ownership structure and associated governance mechanisms on institutional constraints are reflected in the empirical results as cross-sectional variations in the extent to which outsourcing is invoked as a response to cost pressures by hospitals of different ownership. ©, University of Chicago on behalf of the Accounting Research Center, 2010.
• Eldenburg, L., Soderstrom, N., Willis, V., & Anne, W. u. (2010). Behavioral changes following the collaborative development of an accounting information system. Accounting, Organizations and Society, 35(2), 222-237.
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  Abstract: This research examines physician response to implementation of an activity-based costing (ABC) system developed and designed with physician input. We analyze changes in resource utilization for treatment of cataract patients and find changes in practice patterns, where physicians redeployed resources toward more severely ill patients and decreased average length of stay. We also find preliminary evidence of improvement in financial performance. We contribute to research investigating the influence of user participation on accounting system success, ABC system success, and hospital accounting information systems. © 2009 Elsevier Ltd. All rights reserved.
• Eldenburg, L. G., & Krishnan, R. (2008). The influence of ownership on accounting information expenditures. Contemporary Accounting Research, 25(3), 739-772+643+650.
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  Abstract: This paper analyzes the association among ownership, top management incentives, and expenditures on accounting information. We argue that organizations with privately appointed boards of directors such as for-profit and nongovernmental nonprofit organizations use incentive pay practices that encourage managers to use accounting information to improve performance. In contrast, government organizations are publicly governed and are constrained in their compensation practices because hospital CEOs are administrators of government-provided services. However, these hospitals must prove their efficiency to continue to receive adequate budgetary funding. Therefore government hospitals are more likely to use accounting information to gain legitimacy with stakeholders and regulators. Accordingly, we predict a positive relationship between expenditures on accounting information and contracting intensity in privately governed organizations, whereas we expect no such association for publicly governed organizations. We analyze data from California hospitals to determine differences in these roles across ownership types. We find a positive association between contracting intensity and expenditures on accounting information in privately governed hospitals, but no relation in publicly governed hospitals. Finally, we find differences in the use of accounting information within the privately governed hospitals, based on ownership. Whereas for-profit hospitals expend resources on accounting information that helps improve their revenue positions, nonprofit hospitals expend resources on accounting information that facilitates decision making related to operating efficiency and cost containment. © CAAA.
• Eldenburg, L. G., Roman, F., & Teruya, J. (2007). An analysis of the effects of maquiladora production on performance. Journal of Accounting, Auditing and Finance, 22(3), 423-447.
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  Abstract: This study analyzes financial performance in firms that employ maquiladora production, a manufacturing arrangement utilizing Mexican labor. We argue that although accountants can readily identify and value the obvious benefits of labor savings, they have more difficulty identifying and valuing incremental costs from any frictions encountered. The result is that this offshore labor strategy may not be as cost-effective as it would initially appear. We cannot explicitly measure the costs associated with these frictions; we therefore compare performance of a sample of firms that implemented maquiladora production (treatment firms) with performance of similar firms (control firms), examining median return on assets (ROAs) during periods before and after implementation. Results for the median difference tests suggest that although treatment firms benefit from lower committed costs and lower labor costs, there is no corresponding increase in ROA. Results from the regression models are similar and indicate no differences in ROA after implementation, and no differences in committed costs and labor costs. To identify those firms that could have more difficulty estimating costs and benefits, we partition the maquiladora firms on variance of profits, assuming that high-variance firms may be more cautious in their decision making. We find that compared with the low-variance sample firms, high-variance firms experience increases in ROA after implementing maquiladora production. The production process is another firm characteristic that could influence maquiladora success. As expected, when we partition the maquiladora firms on production technology, we find that maquiladora implementation leads to higher ROAs for low-production technology firms.
• Eldenburg, L., & Krishnan, R. (2006). Management Accounting and Control in Health Care: An Economics Perspective. Handbooks of Management Accounting Research, 2, 859-883.
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  Abstract: This chapter summarizes empirical archival accounting research in management accounting that is based on economic theory and uses health care settings. Three perspectives are investigated: (1) production cost economics, including cost structure, cost behavior, cost drivers, the design of cost allocation systems, and the appropriate level of cost aggregation; (2) agency theory, including incentives to bias information or shift costs, the relation between benchmark disclosure and cost containment, and issues pertaining to compensation contracts and performance evaluation; and (3) industrial economics, including the effects of competition and mergers on accounting systems and costs, and capital budgeting responses to regulation. © 2007 Elsevier Ltd. All rights reserved.
• Soderstrom, N., Eldenburg, L., & Ernst, C. (2006). Investigating accounting issues and incentives in a DRG-setting. Betriebswirtschaftliche Forschung und Praxis, 618-636.
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  Abstract: This article describes U. S. accounting research inspired by the U. S. Medicare system's adoption of a DRG based prospective reimbursement system (PPS) in 1983. This paper describes research questions and insights gained from studying the PPS implementation. Each topic is followed by a brief synopsis of its potential relevance for the German DRG-system, as well as some suggestions for further research.
• Kallapur, S., & Eldenburg, L. (2005). Uncertainty, real options, and cost behavior: Evidence from Washington state hospitals. Journal of Accounting Research, 43(5), 735-752.
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  Abstract: 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. Copyright ©, University of Chicago on behalf of the Institute of Professional Accounting, 2005.
• Eldenburg, L., & Vines, C. C. (2004). Nonprofit classification decisions in response to a change in accounting rules. Journal of Accounting and Public Policy, 23(1), 1-22.
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  Abstract: This study analyzes the response of nonprofit managers to a change in accounting regulation. A 1990 change in hospital accounting rules disclosed new information about bad debt and charity care expenses. This change provided managers with incentives to reclassify some bad-debt expense to charity care. Using univariate and multivariate analyses, we find that nonprofit managers respond to their current cash position when making classification decisions to disclose bad-debt expense and charity care amounts. While we expected that charity care levels would influence these managers differentially, cash levels appear to be more important in their disclosure decision making. © 2003 Elsevier Inc. All rights reserved.
• Eldenburg, L., Hermalin, B. E., Weisbach, M. S., & Wosinska, M. (2004). Governance, performance objectives and organizational form: Evidence from hospitals. Journal of Corporate Finance, 10(4), 527-548.
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  Abstract: In a sample of California hospitals, we find that the composition of the board of directors varies systematically across ownership types. For all ownership types, except government-owned, we find that poor financial performance is related to board and CEO turnover. However, different ownership types place different weights on levels of charity care and administrative expenses. Our overall findings support the proposition that ownership type reflects heterogeneity across consumers and producers, and that differences in these groups lead to differences in the organization's objectives and governance. © 2003 Elsevier B.V. All rights reserved.
• Eldenburg, L., & Krishnan, R. (2003). Public versus private governance: A study of incentives and operational performance. Journal of Accounting and Economics, 35(3), 377-404.
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  Abstract: This study explores incentives and performance in organizations governed by publicly elected boards of directors and subsidized by taxes. Such organizations are likely to underpay Chief Executive Officers (CEOs), resulting in selection and incentive problems and hence poor operating performance. We compare municipal district hospitals to private nonprofit hospitals. CEO compensation in district hospitals is significantly lower than in the nonprofits. Operating margins in district hospitals are lower and deteriorate more rapidly over time. We rule out a number of other factors that could explain differences in performance. We conclude that the weak governance structure hampers district hospitals. © 2003 Elsevier B.V. All rights reserved.
• Eldenburg, L., Pickering, J., & Yu, W. W. (2003). International income shifting regulations: Empirical evidence from Australia and Canada. International Journal of Accounting, 38(3), 313-314.
• Eldenburg, L., Pickering, J., & Yu, W. W. (2003). International income-shifting regulations: Empirical evidence from Australia and Canada. International Journal of Accounting, 38(3), 285-303.
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  Abstract: This study examines market reactions to two different approaches to reduce income shifting in an international setting. The two methods are described and event studies are performed using stock market data from Canada and Australia. Samples of companies from both countries are partitioned into firms predicted to be affected versus unaffected by each country's event. Australia's regulation taxes profits arising in low-tax subsidiaries at Australian rates. Canada's method defines acceptable transfer prices (arm's-length transactions) and describes enforcement and audit policies. We find evidence of stock market reactions on some of the event dates for Australian and Canadian firms affected by these two approaches. © 2003 University of Illinois. All rights reserved.
• Eldenburg, L., & Waller, W. S. (2001). Decision-case mix model for analyzing variation in cesarean rates. Medical Decision Making, 21(3), 170-179.
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  PMID: 11386624;Abstract: This article contributes a decision-case mix model for analyzing variation in c-section rates. Like recent contributions to the literature, the model systematically takes into account the effect of case mix. Going beyond past research, the model highlights differences in physician decision making in response to obstetric factors. Distinguishing the effects of physician decision making and case mix is important in understanding why c-section rates vary and in developing programs to effect change in physician behavior. The model was applied to a sample of deliveries at a hospital where physicians exhibited considerable variation in their c-section rates. Comparing groups with a low versus high rate, the authors' general conclusion is that the difference in physician decision tendencies (to perform a c-section), in response to specific obstetric factors, is at least as important as case mix in explaining variation in c-section rates. The exact effects of decision making versus case mix depend on how the model application defines the obstetric condition of interest and on the weighting of deliveries by their estimated "risk of Cesarean." The general conclusion is supported by an additional analysis that uses the model's elements to predict individual physicians' annual c-section rates.
• Eldenburg, L., & Kallapur, S. (2000). The effects of changes in cost allocations on the assessment of cost containment regulation in hospitals. Journal of Accounting and Public Policy, 19(1), 97-112.
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  Abstract: Empirical studies that examine the effects of regulation on cost containment frequently ignore the impact of changes in accounting practices. This results in a potential bias of research findings. For example, some studies found evidence of cost containment for inpatient services after a change in Medicare reimbursement in 1983. However, Eldenburg and Kallapur (1997, p. 33) found that more costs were allocated to outpatients and correspondingly less to inpatients after 1983, which could bias the cost comparisons. In this paper we examine changes in inpatient costs relative to outpatient costs, after controlling for allocations, to determine whether the magnitude of allocation changes was large enough to bias the findings of studies that ignored these accounting practices. As in previous health-care studies (noted in our paper), we found that inpatient full costs (i.e., direct cost plus allocated costs) decreased relative to outpatient full costs after 1983. However, when cost allocations were excluded, inpatient direct costs increased relative to outpatient direct costs, thus providing no evidence of cost-containment. When regulation provides incentives that have the potential to affect accounting practices and public policy researchers do not consider the implications of these accounting practices, analyses of the success of public regulation may reach improper conclusions. Accordingly, subsequent policy based on such research findings may be incorrectly motivated. © 2000 Elsevier Science Ltd. All rights reserved.
• Menon, N. M., Lee, B., & Eldenburg, L. (2000). Productivity of Information Systems in the Healthcare Industry. Information Systems Research, 11(1), 83-92.
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  Abstract: This research paper analyzes the impact of information technology (IT) in a healthcare setting using a longitudinal sample of hospital data from 1976 to 1994. We classify production inputs into labor and capital categories. Capital is classified into three components -medical IT capital, medical capital, and IT capital - and labor is classified into two components, medical labor and IT labor. Results provide evidence that IT contributes positively to the production of services in the healthcare industry.
• Eldenburg, L., & Kallapur, S. (1997). Changes in hospital service mix and cost allocations in response to changes in Medicare reimbursement schemes. Journal of Accounting and Economics, 23(1), 31-51.
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  Abstract: After 1983, Medicare paid hospitals for inpatient services at fixed rates, but continued to reimburse outpatient services based on reported cost. Using data from Washington State we find that hospitals responded by increasing outpatient services to Medicare patients compared to non-Medicare patients-the ratio of Medicare outpatient revenues as a percentage of total Medicare revenues increased after 1983 to a significantly greater extent than for non-Medicare patients. We also find that allocations of overhead costs to outpatient departments increased after 1983. These findings suggest that hospitals change their patient mix and cost allocations to maximize hospital cash flows.
• Awasthi, V. N., & Eldenburg, L. (1996). Providing cost data to physicians helps contain costs. Healthcare Financial Management, 50(4), 40-42.
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  PMID: 10156596;Abstract: Findings of a survey of 1,200 physicians suggest that healthcare organizations that provide physicians with pricing information can reduce resource utilization and control costs more effectively than organizations that do not provide such information. These findings also suggests that healthcare financial managers who are aware of physicians' responses to costs information-and who furnish them with effective cost information-many gain a timely competitive advantage.
• Eldenburg, L., & Soderstrom, N. (1996). Accounting system management by hospitals operating in a changing regulatory environment. Accounting Review, 71(1), 23-42.
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  Abstract: Under hospital accounting guidelines, contractual adjustments are an allowable deduction from revenue that reflect the difference between gross charges and reimbursement amounts. This study explores the use of contractual adjustments to shift costs among payors and increase revenues within a regulatory environment that attempted to limit cost shifting and set revenue constraints. Throughout the regulatory period, we find that hospitals overestimated budgeted contractual adjustments in a systematic manner which allowed cost shifting among payors and increased revenues. In addition, budgeted patient volumes and variable costs were manipulated in an attempt to relax the revenue constraint. After deregulation, we find that volume and cost biasing behavior decreased while overestimation of contractual adjustmentss increased. Further, we examine the interaction of this regulation with cost-containment regulation at the federal level.