Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Political competition and debt: evidence from New Zealand local governments

Political competition and debt: evidence from New Zealand local governments PurposeThis paper aims to investigate whether the amount of local governments’ debt can be predicted by the level of political competition.Design/methodology/approachThe study uses the artificial neural network (ANN) to test whether ANN can “learn” from the observed data and make reliable out-of-sample predictions of the target variable value (i.e. a local government’s debt level) for given values of the predictor variables. An ANN is a non-parametric prediction tool, that is, not susceptible to the common limitations of regression-based parametric forecasting models, e.g. multi-collinearity and latent non-linear relations.FindingsThe study finds that “political competition” is a useful predictor of a local government’s debt level. Moreover, a positive relationship between political competition and debt level is indicated, i.e. increases in political competition typically leads to increases in a local government’s level of debt.Originality/valueThe study contributes to public sector reporting literature by investigating whether public debt levels can be predicted on the basis of political competition while discounting factors such as “political ideology” and “fragmentation”. The findings of the study are consistent with the expectations posited by public choice theory and have implications for public sector auditing, policy and reporting standards, particularly in terms of minimising potential political opportunism. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

Political competition and debt: evidence from New Zealand local governments

Download PDF
18 pages

Loading next page...
 
/lp/emerald-publishing/political-competition-and-debt-evidence-from-new-zealand-local-kcgs0RTVYW
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1030-9616
DOI
10.1108/ARJ-11-2016-0146
Publisher site
See Article on Publisher Site

Abstract

PurposeThis paper aims to investigate whether the amount of local governments’ debt can be predicted by the level of political competition.Design/methodology/approachThe study uses the artificial neural network (ANN) to test whether ANN can “learn” from the observed data and make reliable out-of-sample predictions of the target variable value (i.e. a local government’s debt level) for given values of the predictor variables. An ANN is a non-parametric prediction tool, that is, not susceptible to the common limitations of regression-based parametric forecasting models, e.g. multi-collinearity and latent non-linear relations.FindingsThe study finds that “political competition” is a useful predictor of a local government’s debt level. Moreover, a positive relationship between political competition and debt level is indicated, i.e. increases in political competition typically leads to increases in a local government’s level of debt.Originality/valueThe study contributes to public sector reporting literature by investigating whether public debt levels can be predicted on the basis of political competition while discounting factors such as “political ideology” and “fragmentation”. The findings of the study are consistent with the expectations posited by public choice theory and have implications for public sector auditing, policy and reporting standards, particularly in terms of minimising potential political opportunism.

Journal

Accounting Research Journal – Emerald Publishing

Published: Sep 27, 2019

References

  • Government weakness and local public debt development in flemish municipalities
  • The political process and the use of debt financing by state governments
  • Towards understanding the role of auditing in the public sector
  • Electoral cycles and local government debt management
  • The determinants of the municipal debt policy in Spain
  • An ANN-based auditor decision support system using Benford's law
  • Political competition and local social spending: evidence from Brazil
  • Using Benford's law and neural networks as a review procedure