Earnings management in English NHS Hospital Trusts

Ballantine, Joan, Forker, John and Greenwood, Margaret (2007) Earnings management in English NHS Hospital Trusts. Financial Accountability & Management, 23 (4). pp. 421-440. ISSN 0267-4424

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In this paper we review the financial reporting incentives associated with the requirement to breakeven for English NHS Trusts. We also investigate the distribution of reported income and estimate discretionary accruals thereby contributing to the limited literature on earnings management in not-for-profit hospitals. We find that Trust managers use discretion over accruals to report income within the target range around zero. The results are robust to recent challenges to earnings management explanations arising from the use of distributional and aggregate accruals methodologies. Our findings indicate that a precise and challenging financial breakeven target based on current cost residual income is associated with wide-spread use of discretionary accruals to an extent that weakens the accountability of NHS Trusts.

Item Type: Article
Keywords: NHS Trusts;financial control;discretionary accruals
Schools and Departments: University of Sussex Business School > Business and Management
Subjects: R Medicine > RA Public aspects of medicine > RA0001 Medicine and the state. Including medical statistics, medical economics, provisions for medical care, medical sociology > RA0410 Medical economics. Economics of medical care. Employment
Depositing User: Catrina Hey
Date Deposited: 21 Jan 2013 16:23
Last Modified: 21 Jan 2013 16:23
URI: http://sro.sussex.ac.uk/id/eprint/43508
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