Public versus private governance: A study of incentives and operational performance

Leslie Eldenburg, Ranjani Krishnan

Research output: Contribution to journalArticlepeer-review

75 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)377-404
Number of pages28
JournalJournal of Accounting and Economics
Issue number3
StatePublished - Aug 2003


  • CEO compensation
  • Financial performance
  • Public governance
  • Tax subsidization

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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