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Financial determinants of local government debt in New Zealand

Author

Listed:
  • Dimu Ehalaiye
  • Nives Botica-Redmayne
  • Fawzi Laswad

Abstract

Purpose - The purpose of this paper is to investigate the financial determinants of local government debt in New Zealand. Design/methodology/approach - To investigate the financial determinants of local government debt in New Zealand, the authors analyse the relationship between key financial variables with local government debt in New Zealand based on the theories of fiscal accountability and moral hazard using a panel data methodology, specifically the pooled ordinary least squares regression model. Findings - The findings suggest that council income is the major financial determinant of local government borrowing in New Zealand rather than infrastructural spending and that during the global financial crises (GFC) borrowing levels of New Zealand local councils was not significantly impacted. However, the findings indicate that post the GFC, low interest rates have stimulated increased borrowing activity by New Zealand local governments to fund infrastructure. Originality/value - This paper is the first to examine the determinants of local government debt in New Zealand. The findings of this study contribute to better understanding of local government/municipality debt in New Zealand and internationally by providing evidence on the financial determinants of debt of local governments and the indirect use of government policy to control local government borrowing. The findings of this study are anticipated to affect local government practices and national government policies in relation to local government finances.

Suggested Citation

  • Dimu Ehalaiye & Nives Botica-Redmayne & Fawzi Laswad, 2017. "Financial determinants of local government debt in New Zealand," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 29(4), pages 512-533, November.
    • Handle: RePEc:eme:parpps:par-11-2016-0104
    DOI: 10.1108/PAR-11-2016-0104
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    Cited by:

    1. Paula Gomes Dos Santos & Fábio Albuquerque, 2023. "Does the Average Payment Period Play a Relevant Role in Explaining the Portuguese Municipalities’ Financial Distress?," Economies, MDPI, vol. 11(7), pages 1-22, July.

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