Institutional Drivers and Governance Mechanisms of Debt Accumulation in Local Authorities: A Critical Review of the Literature with Reference to Zambia

Mutale Mulenga Kelvin, Norman Kachamba, Nsama Musawa and Daniel Chisanga
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Mutale Mulenga Kelvin: Copperbelt University
Norman Kachamba: Copperbelt University
Nsama Musawa: Copperbelt University
Daniel Chisanga: Copperbelt University

African Journal of Commercial Studies, 2026, vol. 7, issue 5

Abstract: Arguments for the devolution of financial control to local authorities as a means to achieve a more efficient, accountable and responsive local service provision are widespread, yet many local authorities in the developing world have continued to accrue unsustainable debt under reforms aimed at strengthening their finances. In this article, we synthesize and critically assess the theoretical and empirical literature on the institutional drivers and governance mechanisms of local-authority debt accumulation, as illustrated by Zambia. We identify that, despite being diverse, these literature streams converge on a single point: that it is institution-and governance-based factors, not just resource endowment, which influence varied debt accumulation pathways. However, the literature remains fragmented across disciplines, levels of analysis and country contexts. We discuss three theoretically informed approaches: institutional theory which elucidates the persistence and routinization of debt producing practices; agency theory, which explores the accountability failures that transform a situation of structural vulnerability into measurable debt; and fiscal federalism, which provides the context of intergovernmental relations within which the municipalities operate. The empirical material is structured by the following themes: perceptions of debt among officials, impact of institutional quality on subnational debt, moderating effect of governance mechanisms, and comparative institutional analysis. We find that a substantive gap remains; there is no council-level, mechanism-specific, mixed-method comparative evidence available from Zambia. In conclusion we suggest an integrative conceptual framework wherein institutional drivers are conceived as antecedents to debt, with governance mechanisms operating as moderators of it and councils as context-specific entities shaped by scale.

Keywords: Local Government Debt; Fiscal Decentralisation; Institutional Theory; Agency Theory; Fiscal Federalism; Governance Mechanisms; Zambia (search for similar items in EconPapers)
JEL-codes: G38 H72 H74 H77 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsl:2026-069

DOI: 10.59413/ajocs/v7.i5.2

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