Health Care Management Papers

Document Type

Journal Article

Date of this Version

6-2008

Publication Source

The Journal of Legal Studies

Volume

37

Issue

2

Start Page

551

Last Page

576

DOI

10.1086/589668

Abstract

A popular theory for why firms take nonprofit status is that it is a signal of quality. This paper offers a simple, empirical test of this theory. If nonprofit status signals quality, surely nonprofit firms would want to ensure that consumers are aware of this. A natural way for firms to do this is to indicate their nonprofit status in their advertising. Taking this cue, we conducted a survey of over 2,800 firms in the hospital, nursing home, or child care industries in order to determine whether nonprofit firms communicate their status to consumers on their Web sites or yellow pages listings. We find that fewer than 7.5 percent of nonprofit firms signal their status in yellow pages listings, only 25 percent do so on their home pages, and 30 percent do so on their about-us pages. Indeed, over 35 percent never signal their nonprofit status on their Web sites. Our evidence does not support the hypothesis that nonprofit status is a signal of quality.

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Date Posted: 27 November 2017

This document has been peer reviewed.