Municipal cost behavior during financial crisis and financial sustainability periods: Evidence from Spain Sotirios Karatzimas Hot

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Uploaded by Sotirios Karatzimas     Uploaded date: August 02, 2021    
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Publication date
July 22, 2021
Paper language
Abstract
This study explores municipal cost behavior during periods of financial crisis and strict financial sustainability legislation. The study employees Anderson, Banker, and Janakiraman approach on a data sample of 48,096 observations from Spanish municipalities for the period 2008-2018. The results suggest that during this period municipality total, service provision and investment expenses exhibit anti-sticky behavior; that is the cost response to an activity level decrease is greater than its response in the case of an activity increase. After the adoption of the financial sustainability legislation this behavior is more intense for all expense categories. Moreover, in periods preceding elections the anti-stickiness trend is mitigated, while size appears to play a role as well, with larger municipalities showing greater anti-stickiness. Eventually, it appears that resource adjustment motivations during crisis periods, under law enforcement and before elections, play a key role in municipal asymmetric cost behavior.
Preferred Citation
Karatzimas, S., Naoum, V. C., & Narbón-Perpiñá, I. (2021). Municipal cost behavior during financial crisis and financial sustainability periods: Evidence from Spain. International Public Management Journal, doi.org/10.1080/10967494.2021.1947924
Keywords
cost behavior; sticky cost; local government; financial crisis; financial sustainability
Email
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Category
Management accounting
Type of Paper
Published paper

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