Analysing the accounting measurement of financial sustainability in local governments through political factors

Abstract

Purpose

The purpose of this paper is to obtain new knowledge about the accounting measurement of financial sustainability in local governments, by studying the influence of political factors on the evolution of income statements.

Design/methodology/approach

This paper analyses income statements of Spanish municipalities from 2006 to 2014, together with mayor profiles and political-institutional factors, using the generalised method of moments system.

Findings

The income statement represents a useful measure to assess financial sustainability, showing the effect of political factors on three dimensions proposed by IFAC (i.e. service, revenue and debt), such as ideological coincidence, political competition, political ideology, and absolute majority or political fragmentation.

Practical implications

The findings can be useful for policymakers and accountants responsible for accountability, supervisory bodies, fiscal authorities, voters, users of public services and other stakeholders interested in governmental income statements.

Social implications

In the Eurozone, the crisis of government finance has made the citizens and the policymakers question the size and volume of public services. Likewise, in countries such as Spain, politicians remain one of the main problems for citizens. These circumstances make it very interesting and timely to study the accounting measurement of financial sustainability and its political explanations.

Originality/value

The findings provide new empirical evidence about the accounting measurement of financial sustainability in local governments, and they identify political factors that influence the evolution of income statements.

Citation

Rodríguez Bolívar, M.P., Navarro Galera, A., López Subirés, M.D. and Alcaide Muñoz, L. (2018), "Analysing the accounting measurement of financial sustainability in local governments through political factors", Accounting, Auditing & Accountability Journal, Vol. 31 No. 8, pp. 2135-2164. https://doi.org/10.1108/AAAJ-10-2016-2754