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Can better financial conditions lead to more fiscal transparency? Evidence from municipalities in California

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  • Hyewon Kang
  • Gang Chen

Abstract

Fiscal transparency is widely promoted as an effective means to achieve government accountability. Although scholars have explored various drivers of fiscal transparency, the relationship between a government’s financial condition and fiscal transparency has received less attention. This study explores this relationship based on signalling, blame-avoidance, and resource hypotheses. Presuming that following the best practices in financial reporting leads to a higher degree of fiscal transparency, this study examines how a local government’s financial condition is associated with the probability of having a certification that represents the quality of financial reporting. Using a sample of municipalities in California from 2003 to 2015, we find that municipalities with a higher debt level and a lower fund balance ratio are more likely to pursue fiscal transparency in financial reporting.

Suggested Citation

  • Hyewon Kang & Gang Chen, 2022. "Can better financial conditions lead to more fiscal transparency? Evidence from municipalities in California," Local Government Studies, Taylor & Francis Journals, vol. 48(5), pages 821-841, September.
    • Handle: RePEc:taf:flgsxx:v:48:y:2022:i:5:p:821-841
    DOI: 10.1080/03003930.2021.1919634
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