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Corporatization in Italian local governments: conceptual framework, issues of financial reporting and empirical evidences

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  • Franco OSCULATI

    ()

  • Domenico NICOLÒ

    ()

  • Carlo VERMIGLIO

    ()

Abstract

This paper aims at analysing the so-called “corporatization” within Italian Local Governments from three different perspectives corresponding to the three different section of this work. The first analyses the basic arguments, limits and perspective of the so-called “corporatization” process in the context of Italian Local Governments. This part of the research describes the main reasons that lead Local Governments to create joint-stock companies for the provision of services and activities previously managed internally. These reasons are basically linked to regulation, as well as financial and organizational issues. The paper argues that, for the most part of the cases, there are several differences between public and private sector on the achievement of the expected benefits from “corporatization” - such as limited liability, efficiency, profits etc. . . In fact, in the public sector, these benefits appear substantially downscaled in comparison with private sector, depending on organizational and governance models of public authorities. The second perspective highlights how public accounting schemes and tools adopted by Italian municipalities for internal and external reporting activities, shows lack of information that determines, in part but not exclusively, the negative results of corporatization from strategic choices made on the basis of insufficient information. The reporting system of municipalities, in fact, does not provide public managers with all the information needed for outsourcing strategic choices and for the financial and strategic control over subsidiaries. The accounts of municipalities, moreover, do not allow citizens to see the overall amount of public expenditures for the provision of each public service. In order to avoid these problems, the adoption of the consolidated financial statement and segment reporting (both interim and annual) can overcome these problems. The last section, described through an empirical analysis based on the accounting data of to the most important Italian Local Governments, demonstrates the limits of corporatization (described in the first section) and the lack of information (observed in the second part), that do not allow the economic, financial and social evaluation of the corporatization process.

Suggested Citation

  • Franco OSCULATI & Domenico NICOLÒ & Carlo VERMIGLIO, 2011. "Corporatization in Italian local governments: conceptual framework, issues of financial reporting and empirical evidences," Departmental Working Papers 2011-34, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2011-34
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    File URL: http://wp.demm.unimi.it/files/wp/2011/DEMM-2011_034wp.pdf
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    References listed on IDEAS

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    1. Lixin Colin Xu & Tian Zhu & Yi-min Lin, 2005. "Politician control, agency problems and ownership reform," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 1-24, January.
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    More about this item

    Keywords

    Corporatization; Italian Local Governments; Segment Reporting; Consolidated Financial Statement; Municipal Subsidiaries and joint-stock companies;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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