Financial Indicators as Determinants of Mayoral Elections

The chapter seeks to contribute to the literature on determinants of local government election by adopting a different perspective focused on the effects of financial indicators on the elections of mayors. Using the agency and the public choice theory, this study implements a model where specific financial indicators—whose selection takes into account the increased autonomy and responsibility of local politicians—have been included to document their effect on mayoral re-election. Focusing on the Italian context, the chapter examines a sample of 129 municipalities during the period 2008-2014, where several elections were held. By using different estimators, findings indicate that the re-election of mayors is affected by the level of indebtedness and the current equilibrium. In addition, current spending is better valued by citizens/voters than capital expenditure, which increases the probability of being re-elected.

Sustainability Assessment of Portuguese Local Governments (2009 to 2017)

Public governance must ensure financial sustainability. This investigation aims to assess Portuguese local governments financial sustainability as the ability to service the upcoming obligations in commercial transactions (under the Late Payment Directive framework) and to study if accounting information enables public local governance with greater transparency and accountability about their financial sustainability. The study will focus on the 308 Portuguese local governments from 2009 to 2017. The number of local governments with average payment periods (PMPs) within 30 days had an increasing tendency. However, their adjusted average payment periods greatly exceed the 30 days, which means limited financial sustainability. In 2017, only 29% of the local governments have an adjusted PMP within 30 days against the 63% if it is used the officials PMPs. Therefore, accounting information does not enable public governance with greater transparency and accountability about Portuguese local government financial sustainability.

Analysis of the Association Between Political Change in Local Government and Municipal Financial Condition in Spain During the Great Recession

The political influence on the financial condition of local government has been examined in various studies in the academic literature. However, no clear relationship has yet been established between such political factors and the constituent elements of financial condition sustainability in the context of the recent Great Recession. The aim of this study is to evaluate the dimensions of electoral size, defined for the chapter's purposes as the effective number of parties, and of transfer (i.e., how electoral gains and losses are related to the configuration of the party system) using a series of aggregate indices. Once these indicators are obtained, they are related to various indicators of financial condition for five Spanish cities. The results obtained show that financial condition either worsened or presented little change in the different cases considered and that various scenarios of aggregate volatility during the study period were detected.

The impact of Financial Information on Voting Behaviour

In the public sector, citizens have been recognized as potential users of financial reporting elaborated by governments. A specific use of financial reporting by citizens is voting decisions, where they can approve or disapprove of the politicians' management. Political budget cycles literature contains many studies that evidence that politicians manage the budget in order to increase their possibilities of being reelected, but there is no consensus about the outcome. This chapter aims to study to what extent financial management influences electoral outcomes and if there is any evidence that the financial management of governments has an impact on election results. The study is focused on Spanish local governments and uses data from the elections of 2011 and 2015. The results indicate that governments with higher capital investments or fewer deficits have no advantages in the elections. However, citizens reward government policies with higher levels of social expenditures and punish higher fiscal pressure.

The Case of Accounting Information for Infrastructural Assets Reporting

In a civil society, citizens require information to assist them in understanding and monitoring how public resources are managed. Accounting information produced by public managers allows such monitoring and helps citizens to participate in the political process when it comes to election or re-election of the politicians. This chapter discusses the case of investments in infrastructural assets and local government borrowing in New Zealand, with an emphasis on the role of accounting information in the context of moral hazard and fiscal accountability of local government politicians and leadership. The evidence in this chapter shows that New Zealand local governments tend to invest significantly more in visible infrastructural assets such as roads, land, and buildings. This confirms the moral hazard theory that local politicians may be prioritizing infrastructure investments that can be seen by their electorate as evidence of their performance in government, presenting a more favourable picture that leads to politicians' election or re-election on local government bodies.

Does It Pay Off for Mayors to Accurately Manage Finance on Municipalities?

Under the premise of rationality, politicians behave to maximize re-election probability. Favorable macroeconomic contexts, alignment with central governance, and balanced public finance will be rewarded leading to re-election. Logit estimations applied to Portuguese municipalities in the period 2002-2017 fail to empirically support these theoretical effects, providing no incentive-controlled policy actions. Local voters do not punish mayors for the adverse economic performance, staying loyal to ideological voting geographically and over time. Only turnout punishes incumbents over the entire period. The introduction of the law of limitation of terms did not change the incentives towards wise governance; therefore, lack of electoral punishments to undesirable policy actions withstands the potential misconduct of incumbents. Existing evidence points to the need of reforms in what concerns electoral participation as when we compel voters to express their democratic rights, they become more critical to undesirable achievements.

Popular Financial Reporting

The study intends to investigate the possibility of adopting popular financial reporting with a view to greater transparency, accountability, and sharing of results with stakeholders, and responding with this tool to requests for non-financial information. Governance and stakeholders often see a close correlation, and this is what gives rise to the need for non-financial information introduced by Directive 2014/95/EU. The answer to this need for transparency towards stakeholders arises first with the corporatization of public bodies, companies, and social utility bodies; then with the introduction of accounting harmonization within a rational accounting process. The research highlights the relevant aspects and approaches of popular financial reporting, assessing their compliance with the needs of the company, the needs of the stakeholders, and the needs of non-financial information to be considered quality after having analysed the other social reporting tools through the case study of the city of Turin.