Regulator Leniency and Mispricing in Beneficent Nonprofits

DSpace/Manakin Repository

Regulator Leniency and Mispricing in Beneficent Nonprofits

Citable link to this page


Title: Regulator Leniency and Mispricing in Beneficent Nonprofits
Author: Heese, Jonas; Krishnan, Ranjani; Moers, Frank

Note: Order does not necessarily reflect citation order of authors.

Citation: Heese, Jonas, Ranjani Krishnan, and Frank Moers. "Regulator Leniency and Mispricing in Beneficent Nonprofits." Harvard Business School Working Paper, No. 15-056, January 2015.
Full Text & Related Files:
Abstract: We posit that nonprofits that provide a greater supply of unprofitable services (beneficent nonprofits) face lenient regulatory enforcement for mispricing in price-regulated markets. Consequently, beneficent nonprofits exploit such regulatory leniency and exhibit higher mispricing. Drawing on organizational legitimacy theory, we argue that both regulators and beneficent nonprofits seek to protect their legitimacy with stakeholders, including those who demand access to unprofitable services. Using data from hospitals, we examine mispricing via “upcoding”, which involves misclassifying ailment severity. Archival analysis indicates less stringent regulatory enforcement of upcoding for beneficent nonprofit hospitals, defined as hospitals that provide higher charity care and medical education. After observing regulator leniency, beneficent hospitals demonstrate higher upcoding. Our results suggest that lenient enforcement assists beneficent nonprofits to obtain higher revenues in price-regulated markets.
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at
Citable link to this page:
Downloads of this work:

Show full Dublin Core record

This item appears in the following Collection(s)


Search DASH

Advanced Search