Hospital Board of Directors’ Composition and Financial Performance: Empirical Evidence from Taiwan

Abstract

The board of directors of a nonprofit proprietary hospital is responsible for supervising and managing major operational matters and reviewing operational results. This study investigates how hospital financial performance is influenced by director and supervisor characteristics among the board members of nonprofit proprietary hospitals in Taiwan. Data were obtained from the Division of Medical Services of the Ministry of Health and Welfare. A generalized linear model was used to evaluate 32 non-profit proprietary hospitals for the years 2006 to 2017, totaling 363 observations. The empirical results revealed a significant positive correlation between the proportion of directors with management qualifications and hospital financial performance. Moreover, the results represented that a higher proportion of board members with a medical background did not correspond to higher hospital financial performance. Although doctors accounted for the highest proportion of board members, indicating their key role in hospital management, the need for board members with management expertise cannot be ignored. Therefore, a balance between directors with management experience and medical knowledge on the board of directors is beneficial for hospital financial performance.