Do conformity and bailouts affect misreporting? The case of public healthcare organisations

Most literature on the antecedents of misreporting in the public sector focuses on the propensity to report financial breakeven, with limited attention to the regulatory and normative incentives that may alter such propensity. This study provides novel explanations for public sector organisations' deviation from breakeven. Its underlying assumption is that misreporting may be shaped by mimetic pressures encouraging conformity as well as regulatory pressures conveyed through soft budget constraints. The empirical analysis includes all Italian public healthcare organisations over 17 years. The findings suggest that public healthcare organisations may manipulate accruals not only to achieve financial breakeven, but also to conform with peers’ financial performance or to worsen reported financial performance in anticipation of a bailout.