Spending Pressure, Revenue Capacity and Financial Conditon In Municipal Organizations: An Empirical Study

A B M Mahbub Alam, Manzurul Alam and Ariful Hoque ()
Additional contact information
Ariful Hoque: Murdoch University, Australia

Journal of Developing Areas, 2019, vol. 53, issue 1, 229-241

Abstract: Much of the past studies on the determinants of financial condition argue that local government financial condition is a function of revenue capacity and spending pressure represented by various socio-economic factors and have exhibited inconclusive results. In response, this study argues that the effects of socio-economic and demographic factors on financial conditions depend on the context in which the local government operates. The inconclusive results found in the literature suggest the need for investigating the effects of these factors in various contexts in order to understand how they operate. This research examines the relationships of spending pressure and revenue capacity with financial conditions of municipal organisations from a developing country's context. Spending pressure indicates the demands for municipal services and is represented by population size, population density and disaster susceptibility. Revenue capacity demonstrates the ability of municipal organizations in obtaining resources for public purposes. Based on theoretical and empirical studies from the literature, this study develops hypotheses and tests them using data from a random sample of 93 municipal organisations from Bangladesh. Analysing data by applying a linear regression model, the paper finds empirical supports for positive relationships of disaster susceptibility and revenue capacity but negative relationship of population size with municipal financial conditions. Such a relationship of population density is found to be positive but insignificant, which contradicts with the results found in the literature. Theoretically, this study enhances the existing literature as it facilitates a better understanding on how the socio-economic and demographic variables interact with municipal financial conditions from a developing country context. The empirical findings can be of great significance for both managers and politicians. While municipal managers can find the information of this study useful in improving their organizational financial conditions by exploiting their relationships with socio-economic and demographic factors to generate appropriate level of revenues and control expenditures, policy makers can derive insights from this study to devise effective financial transfer policies for maintaining sustainability of local government services.

Keywords: Financial Condition; Population; Disaster Susceptibility; Revenue Capacity; Spending Pressure (search for similar items in EconPapers)
JEL-codes: H70 H71 H72 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://muse.jhu.edu/article/702374/pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.53:year:2019:issue2:pp:242-256

Access Statistics for this article

More articles in Journal of Developing Areas from Tennessee State University, College of Business Contact information at EDIRC.
Bibliographic data for series maintained by Abu N.M. Wahid ().