Public sector accounting reforms and the quality of governance

Beatriz Cuadrado-Ballesteros and Marco Bisogno

Public Money & Management, 2021, vol. 41, issue 2, 107-117

Abstract: This paper focuses on two key issues that characterize the current public financial management debate—the quality of governance, and public sector accounting reforms. After investigating a sample of 33 Organisation for Economic Co-operation and Development (OECD) countries for the period 2010–2014, the authors suggest that states which have implemented public sector accounting reforms (through the adoption of accrual based accounting systems and the implementation of International Public Sector Accounting Standards) have a higher level of governance quality. More specifically, their results suggest a positive influence on the level of accountability, government effectiveness, regulation quality, the rule of law, and controlling corruption; while political stability is not affected by such reforms.This paper presents evidence from 33 countries that adopting accrual accounting and implementing International Public Sector Accounting Standards (IPSAS) will improve the quality of governance. These findings suggest these two public sector accounting reforms can solve the agency problem between politicians and citizens and, by doing so, can improve governance. Opportunistic behaviour of politicians can be reduced with standardized and harmonized accounting information.

Date: 2021
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DOI: 10.1080/09540962.2020.1724665

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