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Effects of tuition discounting on university’s financial performance

Author

Listed:
  • Abu Jalal

    (Suffolk University)

  • Shahriar Khaksari

    (Suffolk University)

Abstract

We study how tuition discounting affects the financial decisions of universities, their student recruitment, and reputation. Using a large panel data of U.S. private and public four-year institutions, we find that tuition discounting helps institutions enhance their short-term operating surplus, increase admission yield, and reduce drop-out rate. However, it does not appear to improve the graduation rate or the quality of the incoming students. Institutions relying more on tuition discounting have more financial leverage, less equity, and experience lower liquidity and asset turnover—indicating greater financial risk. These results are stronger for private universities. Finally, out-of-sample tests show that tuition discounting may not help enhance the reputation of private universities.

Suggested Citation

  • Abu Jalal & Shahriar Khaksari, 2019. "Effects of tuition discounting on university’s financial performance," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 439-466, February.
    • Handle: RePEc:kap:rqfnac:v:52:y:2019:i:2:d:10.1007_s11156-018-0715-8
    DOI: 10.1007/s11156-018-0715-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Tuition discounting; University reputation; Financial performance; Higher education financial management;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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