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

Learn More →

The effect of debt intensity on the asymmetric cost behavior: empirical evidence from local governments

The effect of debt intensity on the asymmetric cost behavior: empirical evidence from local... This study explores the relationship between debt intensity and cost stickiness at the local government level, a setting characterized by the existence of debt constraints and political influence.Design/methodology/approachBuilding on a theoretical framework informed by the concepts of coercive isomorphism and accountability, the present study focuses on Greek municipalities and applies Anderson et al.’s (2003) extended methodology, as reviewed by Banker and Byzalov (2014), in a sample of 1,366 municipality year observations for the period 2011–2020.FindingsThe results indicate that the degree of cost asymmetry is negatively associated with debt intensity. Periods before elections present the same picture. This negative relationship becomes insignificant in the case of large municipalities, which probably require more resources to support their operations and incur higher adjustment costs for reducing resources. These findings are robust to use alternative types of expenses associated with cost stickiness and a battery of control variables.Originality/valueLittle is known about the impact of debt level and financial constraints on cost behavior in the public sector context. This study takes a fresh look at the relationship between municipal debt structure and cost stickiness, adding to the understanding of cost behavior considering the debt level, financial constraints, resource-adjustment costs and the underlying managerial behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Public Budgeting Accounting & Financial Management Emerald Publishing

The effect of debt intensity on the asymmetric cost behavior: empirical evidence from local governments

Download PDF
22 pages

Loading next page...
 
/lp/emerald-publishing/the-effect-of-debt-intensity-on-the-asymmetric-cost-behavior-empirical-EzdM1c30iN

References (66)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1096-3367
DOI
10.1108/jpbafm-12-2023-0228
Publisher site
See Article on Publisher Site

Abstract

This study explores the relationship between debt intensity and cost stickiness at the local government level, a setting characterized by the existence of debt constraints and political influence.Design/methodology/approachBuilding on a theoretical framework informed by the concepts of coercive isomorphism and accountability, the present study focuses on Greek municipalities and applies Anderson et al.’s (2003) extended methodology, as reviewed by Banker and Byzalov (2014), in a sample of 1,366 municipality year observations for the period 2011–2020.FindingsThe results indicate that the degree of cost asymmetry is negatively associated with debt intensity. Periods before elections present the same picture. This negative relationship becomes insignificant in the case of large municipalities, which probably require more resources to support their operations and incur higher adjustment costs for reducing resources. These findings are robust to use alternative types of expenses associated with cost stickiness and a battery of control variables.Originality/valueLittle is known about the impact of debt level and financial constraints on cost behavior in the public sector context. This study takes a fresh look at the relationship between municipal debt structure and cost stickiness, adding to the understanding of cost behavior considering the debt level, financial constraints, resource-adjustment costs and the underlying managerial behavior.

Journal

Journal of Public Budgeting Accounting & Financial Management – Emerald Publishing

Published: Aug 7, 2024

Keywords: Cost behavior; Cost stickiness; Debt; Local government; Municipalities; Sticky cost theory

There are no references for this article.