Corporate Governance and Social Impact of Non‐Profits: Evidence from a Randomized Program in Healthcare in the Democratic Republic of Congo

Substantial funding is provided to the healthcare systems of low-income countries. However, an important challenge is to ensure that this funding be used efficiently. This challenge is complicated by the fact that a large share of healthcare services in low-income countries is provided by non-profit health centers that often lack i) effective governance structures and ii) organizational know-how and adequate training. In this paper, we argue that the bundling of performance-based incentives with auditing and feedback (A&F) is a potential way to overcome these obstacles. First, the combination of feedback and performance-based incentives -- that is, feedback joint with incentives to act on this feedback and achieve specific health outcomes -- helps address the knowledge gap that may otherwise undermine performance-based incentives. Second, coupling feedback with auditing helps ensure that the information underlying the feedback is reliable -- a prerequisite for effective feedback. To examine the effectiveness of this bundle, we use data from a randomized governance program conducted in the Democratic Republic of Congo. Within the program, a set of health centers were randomly assigned to a "governance treatment" that consisted of performance-based incentives combined with A&F, while others were not. Consistent with our prediction, we find that the governance treatment led to i) higher operating efficiency and ii) improvements in health outcomes. Furthermore, we find that funding is not a substitute for the governance treatment -- health centers that only receive funding increase their scale, but do not show improvements in operating efficiency nor health outcomes.