title: Finance theory and hospital cash balances.
abstract: Competing financial theories have been offered to understand hospitals' cash holding with scant recent evidence. Using data from a national sample of 608 not-for-profit hospitals, we find support for the trade-off theory which posits targeted cash balances. We do not find support for the financial hierarchy theory which posits a preference for use of cash to pay for capital investments. Findings apply to holdings of cash and marketable securities, but not board-designated funds where no model provided meaningful explanatory power.
authors.affiliation: Department of Health Policy and Management, School of Public Health, Harvard University, USA. hrivenso@hsph.harvard.edu
authors.forename: Howard L
authors.initials: HL
authors.lastname: Rivenson
authors.forename: Dean G
authors.initials: DG
authors.lastname: Smith
mesh_terms: D005375:Financial Audit; D005377:Financial Management, Hospital / Q000191:economics* / Q000458:organization & administration*; D006788:Hospitals, Voluntary; D008962:Models, Theoretical; D014481:United States