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Do public account financial statements matter? Evidence from Japanese municipalities

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  • Bessho, Shun-ichiro
  • Hirota, Haruaki

Abstract

Many governments are introducing business-like accounting systems. This paper examines the fiscal effects of compiling business-like financial statements on the expenditures of local governments in Japan as a complement to cash-based reporting. Using the variation in the deadlines for compiling new statements given by the central government in a difference-in-differences instrumental variable approach, we found that business-like financial statements have limited effects on municipalities’ expenditures but have short-run effects on social assistance expenses. This might be a part of the reconstruction of their expenditure structure.

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  • Bessho, Shun-ichiro & Hirota, Haruaki, 2023. "Do public account financial statements matter? Evidence from Japanese municipalities," European Journal of Political Economy, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:poleco:v:78:y:2023:i:c:s0176268023000022
    DOI: 10.1016/j.ejpoleco.2023.102358
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    More about this item

    Keywords

    Accounting standard; Financial statement; Expenditure; Difference-in-differences with instrumental variables;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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