Information Disclosure, Competition and the Behavior of Firms: Evidence from Nursing Homes

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This dissertation investigates how public disclosure of quality information affects the behavior of firms. The first chapter uses a quality disclosure policy, the Nursing Home Quality Initiative (NHQI), to examine how quality "report cards" affect firms' choices of multidimensional product quality. I show that after the introduction of NHQI: (1) most newly reported quality measures improve slightly; (2) the citation composition shifts in favor of problems not included in reported NHQI measures; (3) nursing homes do not increase quality-related nursing inputs. These findings are consistent with the multitasking hypothesis that, rather than increasing resources for quality improvement, firms may respond to information disclosure about some dimensions of quality by shifting resources away from other dimensions. The second chapter also uses the quality disclosure policy, the Nursing Home Quality Initiative, to test two competing streams of theories about the behavior of non-profits whose profits are not allowed to be legally distributed among shareholders. I find that (1) secular non-profits are as responsive as for-profits to information disclosure in "teaching-to-the-test" while religious non-profits are less responsive than for-profits; (2) concerns about losing potential contributors motivate secular non-profits to shift resources away from unreported dimensions, but this does not occur in the case of religious non-profits; (3) there is no evidence that both types of non-profits mimic the behavior of for-profits when competing with them. All these findings suggest that secular non-profits may use the multitasking strategy in response to information disclosure due to the potential threat of losing contributors, while religious non-profits may have few incentives to do so because of their strong sense of ideals.

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  • 09/20/2018
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