Testing the Reliability of Financial Sustainability. The Case of Spanish Local Governments

Vicente Pina, Patricia Bachiller and Lara Ripoll
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Vicente Pina: Department of Accounting and Finance, Faculty of Economics and Business Administration, University of Zaragoza, Gran Vía, 2, 50005 Zaragoza, Spain
Patricia Bachiller: Department of Accounting and Finance, Faculty of Economics and Business Administration, University of Zaragoza, Gran Vía, 2, 50005 Zaragoza, Spain
Lara Ripoll: Department of Accounting and Finance, Faculty of Economics and Business Administration, University of Zaragoza, Gran Vía, 2, 50005 Zaragoza, Spain

Sustainability, 2020, vol. 12, issue 17, 1-22

Abstract: Local Governments (LGs) have strengthened the financial control as a consequence of mandatory requirements to ensure financial sustainability in their management. The aim of this study is to determine whether financial indicators about financial conditions defined in Spanish regulation are backed by worldwide generally accepted financial benchmarking indicators. For this purpose, we analyze the relationship between Spanish indicators of financial sustainability based on European Union (EU) regulations and Financial Trends Monitoring System Indicators (FTMS) of the International City/County Management Association (ICMA). For this purpose, two methodologies are applied: discriminant analysis and logistic regression, where the dependent variables are each of the Spanish financial indicators and the independent variables are ICMA indicators. The evidence supports that variables that are related to the control of expenditures, debt and the revenues show a greater explanatory power of financial sustainability, being the most important elements which offer relevant information about the financial sustainability measurement of LGs.

Keywords: financial sustainability; local governments; financial condition; benchmarking; financial indicators (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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