Do Accrual-based Financial Statements Improve Local Public Sector Efficiency? Evidence from Japan

Haruo Kondoh and Akinobu Ogawa

MPRA Paper from University Library of Munich, Germany

Abstract: After international organizations such as The Organisation for Economic Co-operation and Development (OECD) advocated for national governments to adopt accrual accounting, the number of countries that switched from traditional cash-based accounting to accrual accounting or amended former cash-based accounting is increasing. This change in the accounting system is referred to as the New Public Management (NPM). One of the core elements of NPM is enhancing budget transparency, efficiency, and accountability of decision making using business-like management tools such as the double-entry bookkeeping method. This study examines the impact of the “local public account revolution” on the efficiency of Japanese local governments using a stochastic frontier approach and panel data. We present evidence that preparing business-like financial statements may increase the efficiency of local governments.

Keywords: Financial statements; Accrual accounting; Efficiency; Fiscal transparency; New public management (NPM) (search for similar items in EconPapers)
JEL-codes: H1 H7 (search for similar items in EconPapers)
Date: 2023-02-01
New Economics Papers: this item is included in nep-acc and nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116193

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