Shareholder Value, Ownership Form, and the Transformation of U.S. For-profit Colleges Since 1997

• In Event: 186 - Regular Session. Sociology of Higher Education. Organizational and Economic Transformation in the Higher Education Field

Abstract

We have contradictory accounts of for-profit colleges as either “nimble critters” that fill educational gaps for the underserved or “agile predators” that gobble up federal subsidies. Both accounts are mistaken in treating all for-profits as roughly the same. Building on findings from economic sociology, I show levels of predation in for-profit BA programs were contingent on shareholder value organizational forms of college ownership. To do so, I analyze all Title IV for-profits that enrolled fulltime freshmen in BA programs since 1997, using an original data set which identifies for each year whether a college was under one of the three possible types of U.S. firm ownership: 1) privately held, 2) private equity, or 3) publicly traded. BA programs tended to perform especially poorly under shareholder value arrangements of private equity ownership and publicly traded ownership. In 2008, the mean graduation rate had fallen to just 37 percent for colleges under private equity ownership and just 25 percent for colleges under publicly traded ownership. At the campus level, moreover, fixed effects models estimate strong negative effects on both fulltime freshmen BA enrollments and BA completions after changes in the ownership form of a college from privately held to private equity or publicly traded. In a surprising contrast, for-profits with privately held ownership actually had substantially higher expected completion rates for fulltime freshmen in BA programs than other comparable for-profits, state schools, and even non-profits. The results fits best with institutionalist theories about shareholder value strategies for cost-cutting and short-term profit maximization.

Author

• Charlie Eaton, Stanford Graduate School of Education