Kuo, J. S., Ho, Y. C., and Lo, K. T. 2014. The Relation between Debt Financing and Not-For-Profit Hospitals’ Donations. NTU Management Review, 24 (2): 151-180. doi:10.6226/NTURM2014.MAY.R11006
Jenn-Shyong Kuo, Professor, National Taipei University, Department of Accountancy
Yi-Cheng Ho, Professor, National Chengchi University, Department of Public Finance
Kuang-Ta Lo, Associate Professor, National Chengchi University, Department of Public Finance
Debt financing has been discussed extensively in corporate finance; however, previous studies seldom apply it to not-for-profit hospitals. Magnus et al. (2003) and Yetman (2007) argued that debt financing would have a negative impact on the charitable donations of notfor-profit hospitals, but they did not provide empirical evidence. This study is the first paper to investigate the relationship between debt financing and donation revenue by using 38 notfor-profit hospitals from 2000 to 2006 in Taiwan. According to our empirical results, we have proved that debt financing has both a crowd-in effect and crowd-out effect on not-forprofit hospitals’ donations. The crowd-in effect tends to exist in low debt ratio hospitals, while the crowd-out effect is often found to exist in not-for-profit hospitals with higher debt ratios. We therefore conclude that Magnus et al. (2003) and Yetman (2007) only proposed the crowd-out effect of debt financing for not-for-profit hospitals; however, they did not consider the possible crowd-in effect of debt financing as we have demonstrated in this study.
not-for-profit hospitaldebt financingdonation