A comparison of the capital structures of nonprofit and proprietary health care organizations.

Abstract

The relative amount of debt used by an organization is an important determination of the organization's likelihood of financial problems and its cost of capital. This study addresses whether or not there are any differences between proprietary and nonprofit health care organizations in terms of capital structure. Controlling for profitability, risk, growth, and size, analysis of covariance is used to determine whether or not proprietary and nonprofit health care organizations use the same amount of leverage in their capital structures. The results indicate that there is no difference in the amount of leverage between the two institutional types. Although nonprofit and proprietary organizations have unique financing mechanisms, these differences do not impact the relative amount of debt and equity in their capital structures.