Capital structure, ownership, and capital payment policy: the case of hospitals

Article Abstract:

This study examines effects of pertinent features of hospital capital payment policies on hospital capital structure decisions in a one-period stochastic, value-maximization model. Separate models are developed for for-profit and not-for-profit hospitals. Hospital debt-to-assets ratios are analyzed empirically using a cross-section of data from the American Hospital Association. Although the effect on capital structure of hospital reliance on cost-based reimbursement cannot be signed theoretically, in both for-profit and not-for-profit cases, a higher cost-based share leads to higher leverage. Factors associated with high bankruptcy risk (e.g. earnings volatility) cause hospitals to take on less debt. (Reprinted by permission of the publisher.)

Finance, Hospitals

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A simple algorithm for the portfolio selection problem

Article Abstract:

The author presents a rapidly convergent algorithm to solve the general portfolio problem of maximizing concave utility functions subject to linear constraints. The algorithm is based on an iterative use of the the Markowitz critical line method for solving quadratic programs. A simple example, taken from the theory of state-contingent claims, is worked out in detail. For technical convergence results, the reader is referred to the appropriate mathematical programming literature. (Reprinted by permission of the publisher.)

Usage, Algorithms, Quadratic programming

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