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This study attempts to analyze the role of governance mechanisms in municipal bankruptcy, which appears to be a neglected area of research. The analysis considers both the organizational level (micro) and the regulatory system (macro).

We use a relevant case of municipal bankruptcy in Italy to discuss the influence of governance characteristics, such as the political and management structure, interaction, and behaviors. The issues related to the accounting system and external audits are also considered. The data for this study are obtained from secondary sources such as audited budgetary reports, public documents, and reports from the Supreme Audit Institution.

The study indicates that the spoils system can favor the politicians’ exercise of power over public managers and undermine the capacity to prevent and manage financial distress. Poor accounting and weak control systems may facilitate this process. The high turnover of top management throughout a mayor’s term in office may reflect political pressure to force accounting rules and achieve flexibility to obtain the expected results or to correct poor financial performance.

To avert municipal bankruptcies, regulations should consider enforcing ex ante control by external oversight bodies, forbidding risky operations and limiting the spoils system for financial management positions and internal auditors.

Municipal defaults around the world have indicated that regulations and audits are ineffective to prevent local governments from failing. A full understanding of complex mutual interactions between the mechanisms of governance and the behaviors of politicians and managers can provide valuable insights to prevent local governments from failing.

In recent years, public management research has been focused at the public value paradigm. However, many discussions on this topic are motivated at least as much by theory as by evidence. We do not yet have a comprehensive empirical understanding of what happens when the public value paradigm is translated into practice within organizations. An important theoretical question is how to match the public value approach and measurement to specific contexts. Understanding barriers to effective implementation and identifying what might be done to overcome obstacles are interesting issues for advancing theory and practice.

By deploying and testing the same approach and method of measuring public value in two local governments, this article aims to shed light on barriers to implementing the public value paradigm in practice.

The study’s findings show little evidence to support claims for a paradigmatic shift towards the public value paradigm in the Italian case.

Managerial implications of public value measurement are also taken into consideration.

We know little about what conditions drive individual governments towards the adoption of a public value approach and measurement. Undoubtedly, this issue has huge practical relevance when introducing public value discourses in bureaucratic governmental settings.