In this paper, we use the relative performance evaluation model of Gibbons and Murphy (1990) to examine the relationship between management compensation and the absolute and relative financial performance of 223 non-profit hospitals in Ontario, Canada for the year 1985–86. We find support for the hypothesis of a positive relationship between absolute hospital performance and management compensation and a negative relationship between relative hospital performance and management compensation. Management compensation is also influenced by the size, teaching status, and religious affiliation of the hospital.
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