The effect of asset tangibility on hospital financial performance in South Korea

Abstract

ABSTRACT Many hospitals risk closure owing to rising costs, declining revenue, and reduced profits. Given the importance of identifying factors that impact hospital profitability, our study examines the relationship between tangible assets and the financial performance of hospitals in South Korea. We also investigate the moderation effects of hospital location. Our analysis is based on hospital accounting data provided by public institutions in South Korea and includes medical facilities, machine facilities, structures, buildings, and vehicle assets as tangible assets, which affect three types of return on assets. The results indicate that medical facilities and building assets have a significant positive impact on medical profits but a negative effect on income before reserve funds for essential business and net income, which can be offset by increased vehicle and transportation equipment assets. Operating vehicles and transportation are particularly beneficial for hospitals in Seoul metropolitan areas. This study is meaningful because it uses reliable, externally audited data from an advanced South Korean medical market. Our findings may provide valuable insights for policymakers and hospital management seeking to improve hospital profitability and identify institutions requiring financial assistance not only in South Korea but also in other countries that have advanced medical markets.