Electronic International Standard Serial Number (EISSN)
1873-2070
abstract
We argue and find evidence that the spending of consolidated municipal enterprises is influenced by elected officials' incentives to meet fiscal policy targets. Our evidence indicates that municipalities have control over the operating decisions of consolidated municipal enterprises, despite their autonomous legal status. Importantly, we find that the implications of elected officials' attempts to avoid a fiscal deficit for consolidated subsidiaries' spending do not extend to the counterfactual case of non-consolidated entities also owned by the municipality. Therefore, while consolidation promotes fiscal monitoring, it also plausibly enables politicians' agenda to permeate areas designated to be kept at arm's length.
Classification
keywords
consolidation; government accounts; municipal enterprises; real earnings management; real effects of consolidation regime