Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
Multitasking, Information Disclosure and Product Quality: Evidence from Nursing Homes
Mandatory disclosure may give firms an incentive to reallocate resources across different dimensions of quality without necessarily increasing overall quality. In this paper, I investigate how mandatory quality 'report cards' affect firms' choices of multidimensional product quality. I use a mandatory quality disclosure policy -- the Nursing Home Quality Initiative (NHQI) -- to test how nursing homes' quality decisions change with this policy. NHQI, introduced in 2002, publicly reported selected quality-related measures of nursing home performance. I show that after the introduction of NHQI: (1) most of the newly reported quality measures improve slightly and (2) the number of deficiency citations for problems not included in reported NHQI measures increases. In addition to these key findings, I also show that nursing homes do not increase quality-related nursing inputs, and consumer demand becomes sensitive to the newly disclosed quality measures. Finally, I find that the increase in deficiency citations is not fully explained by changed inspector behavior and that there is little evidence that nursing homes vertically differentiate their services via quality information disclosure. These findings are consistent with the multitasking hypothesis that, rather than increasing resources for quality improvement, firms may respond to an increase in information about some dimensions of product quality by shifting resources away from other dimensions of quality. Furthermore, the findings challenge the conventional wisdom that more information is better.